Friday, April 12, 2013

Lawler: "Why Active Listings Excluding All Pending Contracts Aren’t a Good Measure of Inventory"

by Calculated Risk on 4/12/2013 02:51:00 PM

From economist Tom Lawler:

Below are charts showing some historical data on residential properties under contract versus residential homes closed in Tucson, the mid-Atlantic region covered by MRIS, and Orlando. As the charts indicate, over the last few years home closings (closed sales) have been far below what one normally might have expected based on the pre-housing bust relationship between homes under contract and home closings. All of these areas have much higher share of outstanding contract with contingencies (including short sales pending lender approval) today than was the case five or six years ago.

Tuscon Inventory

MRIS Inventory

Orlando Inventory

CR Note: Tom makes an important point. I mention this every month when the NAR releases their existing home sales report: "The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005.   In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year."

I think active listings mostly impact price, but all the contingent and pending listings make it hard to compare "inventory" directly to earlier years.