Thursday, February 20, 2014
Inventory rose year-over-year in 22 of the nation's 35 largest metro areas covered by Zillow, with the largest inventory gains coming in some of the areas that were hit hardest by the housing recession, including Las Vegas (up 42.8 percent), Phoenix (up 30.5 percent) and Sacramento (up 26 percent). These metros also experienced significant cooling in the pace of home value appreciation in January, as buyers had more homes to choose from and were less apt to engage in the kinds of bidding wars that helped drive prices up so quickly last year.
I have been suggesting that we would start to see a lot more homes for sale starting in January, as home buyers who are theoretically now even or "above water" on their mortgage after paying too much before the bubble popped look to sell and move on, with less debt.
I can say anecdotally that I'm seeing "for sale" signs pop up like weeds every day now, as I drive pretty much the same routes throughout central and south-central Denver regularly. I'm also seeing more "coming soon" signs. Back in 2007/8 when I noticed these, I assumed the was house not for sale yet. It is, however, for sale but it is not officially listed. The "coming soon" sign means the broker has an exclusive, albeit usually short term, selling agreement - a "hip pocket listing," as it's called. The house is for sale but it's not listed in the MLS system and therefore does not show up in the National Association of Realtors "inventory" metric. The latter of which actually lags the market by 2-3 months anyway.
Let's say in any given market that maybe 5-10% of all homes sport the "coming soon" brand. That means that at any given time the actual inventory of homes for sale is 5-10% higher than is being officially reported or being represented by your most helpful home salesman. Just one more source of fraudulent data that has infected our entire system.
I suspect that anxious buyer demand for homes was "pulled forward" into 2013. The anxiety stemming from the "low inventory" narrative, from the new FHA mortgage rules this year which make getting an FHA mortgage (20% of all mortgages) more restrictive/lower size limits and from fear of higher interest rates. In other words, this rising inventory will be met by significantly reduced demand from both "organic" buyers and investment buyers. As I pointed out in my articles over the last three months, we saw evidence of a decline in both buyer cohorts in the last quarter of 2013.
Look out below...
Posted by Dave in Denver at 11:00 AM