Realtors Forecast End of Falling Prices While Inventory For-Sale Approaches Peak Crash Levels

New Observations estimates excess inventory for sale equals 1.4 million units with over 4-million homes on-the-block, a figure hovering just 11 percent below peak-crash inventory, while at the very same time the realtors’ chief economist forecast Monday that “the housing price correction appears essentially over.”

A respectable 521,000 units sold in April, yet inventory for sale increased by 418,000 units. On average inventory is 2.66 million units and currently 4.04 million homes are for-sale (Please see the chart nearby of units for sale. The red line represents an average. Click image for a large view.).

Inventory increased to 8.4 months of supply versus the long-run average of 5.8 months and the recent low of 6.5 months last November. The crash high inventory was 11.3 months in April 2008.

“Although inventory levels remain above normal and much of the gain last month was seasonal, the housing price correction appears essentially over,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR). “In fact, a majority of the markets have seen price gains recently. A return to old-fashioned responsible lending and buying will help the housing market avoid disruptive and painful bubble-bust cycles.”

Last week the Mortgage Bankers Association said that a record 4.63 percent of homes are in foreclosure. Foreclosures are a major contributor to falling prices.

On the positive side of the ledger, interest rates are outstanding right now and affordability has dramatically improved following a 30 percent national loss in home prices which started four years ago.

The national median existing-home price was $173,100 in April, up 4.0 percent from April 2009. Distressed sales accounted for 33 percent of the total and all-cash sales clocked in at 250 percent of their normal tally.

“Buyers are focused on finding the right house and taking advantage of favorable affordability conditions,” said Vicki Cox Golder, NAR president and owner of Vicki L. Cox & Associates. “For many buyers, owning a home is a lifestyle choice. They want a place of their own to raise a family, build memories, and be part of a larger community.”

Nearly 10 percent of current mortgage borrowers are seriously delinquent, being 90-days late or more. New Observations estimated last week that a minimum of one in ten mortgage borrowers will lose their home to the bank in a distressed sale or foreclosure in the next two years.

Our real estate market rests on a razor’s edge. On the edge lie high mortgage delinquencies, 12 million homeowners who have no equity or negative equity, high unemployment stuck at 10 percent, an unprecedented loss in house values following a bubble greater by far than any in the last 120 years, and a frightened Fed and Treasury who literally own the new mortgage market in the United States. Predicting that we are done with falling prices may end up landing the speaker north of reckless. Desperation hides behind a mask of confidence.


PRINT — Realtors Forecast End of Falling Prices

Please see more on NAR at Calculated Risk for inventory and sales. Click for press release from NAR. Thanks for carrying the story to Business Insider, Mortgage News Clips, Seeking Alpha.

Please forward questions, corrections, and reactions to comments below or send me an email. Please send an email if you would like to take out a new mortgage.

Michael David White is a mortgage originator in Chicago.

11 thoughts on “Realtors Forecast End of Falling Prices While Inventory For-Sale Approaches Peak Crash Levels

  1. Brian

    Great Stuff Michael. I find it interesting that people try to quantify housing values by looking at month to month trends; very short sighted. When you look at the bubble and how it was manufactured then add in downward pressures, like unemployment, rising interest rates, public sentiment, and the realization that housing has become a nightmare not a dream; we will see the defaults continue and the optimists look the fools they are today and were yesterday. Thanks for shedding light. I would love to use your charts if that is okay.

  2. Jon

    HI Mike,

    The dollar is rapidly strengthening and the stock market is responding just as quickly. Is there a similar correspondance between housing prices and the doller ?


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  4. Steve NewHampshire

    Hi Michael, I enjoy your commentary.

    I’ve been closely following the real estate markets of Massachusetts and southern New Hampshire since ’07 when I was lucky to have sold my previous home. We have an offer in on a home right now, but I share your continued concerns.

    Here’s what I’m seeing: It’s a tale of two markets where the sub $400K properties were moving briskly in response to the $8K stimulus and the artificially low interest rates. Higher end houses from $400-$800K sit for months and go through multiple price drops before selling. Mass prices seem to be stabilizing at higher levels than I expected, but it will take a few more months to see if the government intervention had any lasting effects on the upper end homes. From, I see a very high supply of >$400K homes in towns like Westford, Acton, Harvard, Westborough, Stow, etc.

    The big question is are these real sellers, or are they trying to capitalize on the temporary surge of optimism? Either way, the massive number of listings tells me that there’s a lot of people that would like to be selling their homes. As a result, it doesn’t seem likely that housing appreciation can occur with stiff headwinds of high supply and higher interest rates coming our way. Another factor to consider is that local property taxes have held the line or moved higher in response to the economic downturn instead of adjusting municipal budgets lower. Add it all up and it’s hard to see where the extra money will come from to drive up the price of housing. Real job growth tied to new innovations would do it. Temporary Census jobs probably won’t…

    Personally I’m choosing to buy because we’ve found a great property that just dropped the price $40K and the house is $140K below assessed value which will allow us to file a property tax abatement. Combine that with the surprising slide in mortgage rates over the last 6 weeks and it was an easy decision. Locking in at the low rate guarantees that we’ll pay less than any high end apartment available in this area, and I really like having a place to sleep at night.

    What do I worry about? Strapped city budgets and gutless politicians not being able to stand up to the public worker unions. A near certainty of higher interest rates squashing any home equity. Higher Federal taxes to pay for the Wall Street bailouts and continued massive national budget deficits.

    On the flip side, I see the Feds bringing back the $8K stimulus in some form, continued Fed support of the mortgage market (either explicitly or behind the scenes), and continued deficit spending on anything to prevent deflation. In the end, they can’t give up on residential and commercial real estate because the entire house of cards comes down if they do. That should factor strongly into your investment decisions.

    It all comes down to one fundamental question. What does that green piece of paper in your wallet really mean, and can you really prevent the mental midgets in D.C. from reaching into your wallet with their continued interventions? The most valuable commodity in the world is time, and the most important asset you’ll ever own occupies the space between your ears.

    Good Luck, I’m looking forward to your next piece.

  5. I’m a big fan of your analysis – I especially love your 10 charts piece.

    Thanks for the serious dose of reality you’re dolling out here Michael. You nailed it.

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