Inventory key to housing rebound
By all accounts, 2012 was a pretty good year for home sales.
Nationally, the pace of sales for existing homes was up 9 percent from 2011, with total sales the highest in five years, according to the National Association of Realtors. Locally, closed sales of new and existing homes rose 15 percent last year, following three years of sales declines, according to the Greater Capital Association of Realtors.
But real estate watcher CoreLogic, in a mid-January report, offered this potential hiccup: “The major factor driving the market in 2013 is the lack of inventory,” it said.
According to the California company, a drop in home prices — brought on by the rash of foreclosures that accompanied the housing bust — kept many prospective sellers on the sidelines because their homes wouldn’t fetch what they needed to trade up to new properties.
“The lock-out phenomenon, combined with the rise in investors converting foreclosures into rentals, led to a lack of for-sale inventory,” it said.
The National Association of Realtors put the supply of existing homes for sale at year’s end at 4.4 months — the amount of time it would take for all 1.82 million available homes to be sold. That’s the lowest supply of housing since May 2005, near the peak of the housing boom, according to the association.
Lawrence Yun, the group’s chief economist, said the concern with tight inventory is what it does to home prices.
“We don’t want to see a rapid appreciation in prices where prices rise much faster than family income — that is a very unhealthy development for the market conditions,” he said last week as the association posted December and year-end sales statistics.
Data released by the Greater Capital Association of Realtors, a Colonie-based trade group, put the supply of homes for sale in its 11-county area at 9.2 months in December, a low for the year. The level has been dropping steadily since July, when it stood at 12.9 months. A year earlier, it was as high as 16.4 months.
Miguel Berger, 2013 president of GCAR, told me this week that a six- to seven-month supply of available homes is ideal; less than six months makes for a “very tight market.” The GCAR data show that in the boom years of 2005 and 2006, inventory locally was down to a two- to three-month supply.
Berger, a 29-year veteran of real estate sales, said he focuses more on price than inventory or sales data to gauge the market’s health. For 2012, GCAR put the median sale price of homes at $192,000, up 4 percent from a year earlier.
“As long as the average price doesn’t go crazy” and “appreciates with inflation” at a 3 percent to 5 percent clip, he’s happy, said Berger, broker-owner of Better Homes and Gardens Real Estate Tech Valley, which has offices in Loudonville and Clifton Park. Contrast that with home prices in 2005, he said, when “nothing made sense.” The CoreLogic report predicts a 6 percent rise in home prices this year — a bit higher than Berger’s ideal. It sees that coming from continued improvement in the market due to steady demand, fewer short sales and tighter inventory.
“The rise in prices will reduce the home equity lock-out effect and help sales and available inventory,” the report says. “In addition, household formations have increased over the last 18 months, providing a nice base of support for housing demand.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at email@example.com.