Via the Economist with notes from others.
“Inventory is at a bullish level, for homebuilders and markets overall.”
Alas, it’s not a very big bull.
Third worst on record, but still better. New home sales are not resales. New sales are new contracts, resales are done. It’s a comparison of, bird in hand to what might be in the bush.
Locally, sales have been better at the lower end. That’s as it should be. The lower end has produced the inventory by way of foreclosures. The lower end is where the $8,000 tax credit is focused. The lower end is where the buyers are.
That last part is the problem for the market. The lower end is supported by incomes, by tax incentives, low rates, and by supply. Watch out if prices rise.
The middle has too much supply, and is trying very hard not to be elastic. There’s plenty of supply, and in order for that to drop people will need more income, more tax breaks, lower rates, and/or prices will still need to fall. If all four happen then the pain will be spread nicely.
A last note on inventories. Inventory measures in real estate miss homes that aren’t marketed, homes that are rented but really should be sold, and vacant properties. Unfortunately, all three of those categories remain near their highs.
I don’t like to sound too negative, but when national media gets behind such sentiments the issue is that the bond markets may react against inflation. If they do they’ll miss the boat, and create the circumstances for another wave of stagnation in real estate.
