by Bill McBride on 6/06/2011 02:45:00 PM
Monday, June 06, 2011
The following is from economist Tom Lawler:
Over the weekend I “downloaded” historical data on active listings of SF homes and condos for 54 metro areas back to April 2006 from housingtracker.net (it was a pain). The historical data are monthly averages of weekly listings, and in May the 54 metro areas combined had 1,111,996 listings.
CR Note: the following graph combines two graphs from Lawler.
Below is a chart for all 54 metro areas [and] of the NAR’s estimate of the inventory of existing homes for sale over the same period (May 2011 data are not yet available).
Click on graph for larger image in graph gallery.
May listings for the 54 metro areas were down 6.8% from last May; down 10.2% from May 2009; and down 26.1% from May 2008!
Obviously, the trend in listings for the 54 metro areas is materially different from the NAR’s inventory estimates over this period. Here is a table showing April 2011 listings compared to listings in April for the previous 5 years.
|% Change in Residential Listings/Existing Home Inventory, April 2011 from:|
|NAR||HT 54 metro areas|
There are numerous possible reasons for these differences. First, of course, the 54 metro areas in housingtracker.net’s report are probably not as a group representative of the US market as a whole. There is a heavy representation of “bubble” markets in housingtracker.net’s list where listings soared in 2006/07 but have since fallen sharply (not true, btw, for all troubled markets, with Vegas and Reno being obvious exceptions). Second, HT’s listings may include some new homes listed for sale, which I think NAR tries to exclude.
Another big reason, however, is related to the NAR’s methodology for estimated existing home inventories. The NAR collects sales and “months’ supply” data from around 160 boards/MLS across the country, almost all of which are located in or adjacent to metropolitan statistical areas. The NAR assumes that the % changes in sales from these Boards/MLS reflect total sales across the country, and they apply these changes to “benchmark” estimates of total existing home sales derived from an analysis of decennial Census/AHS data (the last benchmarking was based on 2000/01 data, but that same methodology can’t be done with the Census 2010 data). For inventories the NAR uses the “months’ supply” data from these Boards/MLS to derive a months’ supply estimate for the nation as a whole, and “solves” for the inventory level. (Though multiplication!)
Most analysts believe – as does the NAR, by the way – that the NAR’s methodology has overstated existing home sales for the past four years or so, with the overstatement emerging no later than 2007 and growing over subsequent years. Given the NAR’s methodology of using sales and months’ supply to generate inventories, an overstatement in sales would also produce an overstatement in inventories, and a rise in the degree to which sales are overstated would result in an increasing overstatement of inventories as well. (In discussions of the NAR’s “overstatement” of existing home sales, some analysts incorrectly concluded that one implication was that the months’ supply numbers were understated. That is not correct.) Thus, inventories over the last 4-5 years have probably declined by more than that suggested in the NAR report.
There may be other differences as well. E.g., Boards/MLS do not all report active listings on a consistent basis.
But flipping back to the housingtracker.net numbers, it seems pretty clear that inventories in a large number of metro areas have declined significantly over the last several years, and have declined significantly more than a look at the NAR data might suggest.
To be sure, declining listings across most of the country is not necessarily “bullish” for housing, as home sales have also declined – that is, there has been declining demand as well as declining supply. Still, the declining supply is welcome news.
A table showing May 2011 listings compared to listings in the May of the previous 3 years is shown [below].
|Active Listings, May 2011 Compared to May of Previous 3 Years, Various Metro Areas|
|Houston||-5.7%||6.2%||-16.0%||Salt Lake City||-15.0%||-20.3%||-20.3%|
|Kansas City||-3.0%||-2.4%||-22.4%||San Francisco||-3.7%||-3.3%||-29.1%|
|Las Vegas||4.6%||-2.8%||-2.4%||San Jose||-6.7%||-9.8%||-28.2%|
|Los Angeles||2.7%||6.1%||-23.1%||St. Louis||-7.4%||2.9%||-13.4%|