RE/MAX: Falling Inventories Turn from Friend to Foe

Dwindling inventories are now less than three-quarters the size that they were a year ago, according to the latest national report from RE/MAX. In fact, Inventories are so low that they have turned from friend to enemy of the housing recovery, limiting home sales, especially in the lower price range, where most sales are now occurring.

That’s the bottom line from the July RE/MAX National Housing Report, providing the latest evidence that the inventory drought is continuing unchecked, setting new records every month. RE/MAX reported available homes-for-sale are falling 26.8 percent lower than last July and sales could be much greater if more inventory was available, especially in the lower price tiers. (See Entry Level Wars Erupt).

RE/MAX reports a greater inventory decline than any national report to date. Last week Realtor.com reported that in July total US for-sale inventory of single family homes, condos, townhomes and co-ops was down 19 percent compared to a year ago and 40 percent below its peak of 3.10 million units in September, 2007. The median age of the inventory of for sale listings was up slightly in July but 9.27 percent below the median age one year ago.

The inventory of homes-for-sale fell 5.4 percent from June and month-to-month inventories have now fallen for 25 consecutive months. A shrinking inventory is helping home prices rise, but may also be limiting sales. Given the current rate of sales, the average months supply is now 5.3, about two months lower than the 7.2 average seen in July 2011. Very low months supply continues to be seen in San Francisco, CA 1.2, Los Angeles, CA 1.8, Denver, CO 2.4, Orlando, FL 2.5, Phoenix, AZ and Miami, FL 3.1.

For all homes sold during the month of July, the average days on market was 82. This represents a drop of 2 days from the average in June and 6 days from July 2011. July represents the second month since September 2011 with days on market below 90, and the lowest average since July 2010. The days on market average continues to fall in many markets due to low inventory. Days on market is the number of days between first being listed in an MLS and when a sales contract is signed, RE/MAX reported.

Even with limited inventories, July home sales are 10.3 percent higher than sales last July and year-over-year home sales have now risen for 13 consecutive months. Median home prices have now reached levels higher than the previous year for six months in a row, with an increase of 3.7 percent over July 2011.

“It’s reassuring that both sales and prices continue to rise higher on a yearly basis, indicating that this housing recovery is real,” said Margaret Kelly, CEO of RE/MAX, LLC. “Overall, the picture is getting brighter each month, but what we need for a sustainable recovery is a turn-around in unemployment and better availability of mortgages, especially for higher priced homes.”