Inventories Continue to Fall

Record low inventories of homes for sale, which are boosting home values and prices but depressing sales, show no signs of letting up. Though decline is normal this time of year, inventories stubbornly remain at decades-low levels.

Today the National Association of Realtors reported that the total housing inventory at the end July increased 1.3 percent to 2.40 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, down from a 6.5-month supply in June. Listed inventory is 23.8 percent below a year ago when there was a 9.3-month supply when distressed properties were flooding the market. The unadjusted supply of homes for sale is 2.40 million units, up slightly from June’s 2.37 million but down from May’s 2.47 million.

Earlier reported listings on its database fell by 1.09 percent in July and is down 19.26% percent. Since the beginning of the year, total inventory on has averaged about 1.8 to 1.9 million units, the lowest levels since January 2007.

Given population and demographic demand, Yun said existing-home sales could be in a normal range of 5 to 5.5 million if all conditions were optimal. “Sales may reach 5 million next year, but it will require more sensible lending standards and stronger job creation to push beyond that,” said Lawrence Yun, NAR chief economist.

Yun said there are distortions in housing inventory. “The total supply of housing inventory appears to be balanced in historic terms, but there are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers,” he said. “The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers.”

For sale inventories on in July declined on an annual basis in all but 2 of the 146 MSAs it monitors, with for-sale inventory dropping 20 percent or more in 67 of the 146 markets covered. The 10 MSAs with the largest year-over-year declines in their for-sale inventories in July 2012 are Oakland, CA -59.30 percent; Fresno, CA -47.81 percent; Bakersfield, CA -44.71 percent; Seattle-Bellevue-Everett, WA -42.23 percent; San Jose, CA -41.76 percent; San Francisco, CA -40.26 percent; Stockton-Lodi, CA-40.24 percent; Riverside-San Bernardino, CA -40.03 percent; Atlanta, GA -38.27 percent; and Sacramento, CA -36.43 percent.

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