Listings Begin Typical Seasonal Decline in October

Let’s have a look at how listings are doing over the last few months.

First up, here’s a view of how inventory has grown so far this year:

On-Market Inventory Growth: 2000-2013

2013 is shaping up to have the fourth-largest one-year growth in inventory on record, behind 2007, 2006, and 2001.

Next, the last three months’ worth of new listings, comparing 2013 to every year I’ve got data for.

Total New Listings: July-September 2000-Present

August through October 2013 saw more new listings than the same period in 2012 and 2011. Unfortunately for buyers this measure is getting slightly worse, as just two months ago we were also beating 2010 and 2009.

The next chart shows the difference between the number of new listings each month and the number of pending sales. Prior to late 2011 this number was almost always positive, except in December, when very few new listings hit the market. From October 2011 through March 2013 this measure was negative, indicating very tight inventory.

New Listings Less Pending Sales 2000-Present

In October this flipped back into negative territory, where it will most likely stay through the end of the year, given the typical seasonal patterns.

Finally, let’s take a look at the “stale listings” measure, which uses the total listings, new listings, and pending sales counts to estimate how many listings are “carried over” from one month to the next.

Stale Listings 2000-Present

Stale listings in October were pretty much on par with where they were in September.

Listings typically decrease fairly dramatically during the last few months of the year, and this year is not likely to be an exception. However, given the shift we saw beginning around May, with decreasing inventory finally turning into increasing inventory, it seems likely that next year will shape up with a much more substantial gain in listings.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

10 comments:

  1. 1

    It Could Also Be Like Automobile Sales From 2008-2011

    Everyone put it off, even lease/rentals; due to the economic degradation.

    Then, by 2012, the old cars were totally wore out and the used ones way too expensive; this eventually drove new car sales up in 2012-2013. Pent up demand.

    Houses, different scenario, but same economic degradation delay in sellers’ desire to lower prices and unload right away in the Seattle area. Eventually though, even the bank held properties gotta go, it becomes way too costly to hold on to ’em, even lowering their prices is cheaper…

  2. 2
    Erik says:

    Does anyone else out there feel like this is a big pump and dump scam controlled by investors like blackstone? Inventory will remain low while they are pumping. They will begin dumping any time now. Could not be until 2015, but is inevitable. Once investors start dumping, I think prices could go lower than they did in Feb. 2012. Only this time the government won’t be able to help us out with low interest rates. The writing is on the wall.

    If I had to guess who is smarter, I would put my money on investors. Their job is to make money and that is what they will do. We are looking at micro economics here on this site, but there is a bigger picture here.

  3. 3
    mike says:

    RE: Erik @ 2 – No. Not after 5+ years of record low building and millions of houses being demolished or falling into severe disrepair. (nationwide)

    If investors were holding empty homes the way they were in 2007 this would be a problem, but they’re not. Every house that gets ‘dumped’ on the market creates a displaced tenant. Now IF for some reason investors dumped, tenants decided not to buy or rent another unit (IE most moved into mom’s basement) sure, there could be an oversupply. But then what we’re talking about is likely another recession worse than the last one, not another housing bust fueled financial crisis.

  4. 4
    redmondjp says:

    RE: mike @ 3 – Mike, the difference now is, the investors own rental properties instead of empty homes.

    What’s going to happen to our economy when the tapering of QE starts?

  5. 5
    mike says:

    RE: redmondjp @ 4 – yes, that’s obvious but “rental” implies “tenant”, no? A reduced cash flow basis sort of implies another recession, which would also reduce the odds of being able to sell the properties and move the money into a higher performing investment. I don’t understand why so many people think the end game here involves kicking tenants out on the streets and having a fire sale on millions of vacant properties. It’s possible, but it sure doesn’t seem probable when the nations housing stock hasn’t kept up with population growth for more than half a decade. Even that’s an understatement as housing stock has barely grown at all in that time.

    Everyone has different opinions of what’ll happen when the QE tapers. There will be a lot of economic changes but whomever can predict this will not need to worry about anything else as they’ll be fabulously wealthy having known the future.

    The best we can hope for is QE tapering doesn’t coincide with some other major catastrophe that turns it into a disorderly process. The risk is certainly there, especially with the problems in congress and weak economic growth.

    Still, I don’t see investors dumping properties across the board, though it could happen in certain under-performing markets. In the last 10 years what we’ve seen is renters becoming owners, owners becoming renters, likely followed by a slow shift back to ownership – just not to the levels seen at the market top.

  6. 6
    Erik says:

    RE: mike @ 5
    I think that when renters get kicked out of one rental, they will look to move to a new rental. That seems like a fair assumption. Also, if we go into another recession, wont home prices drop? I would think so. Now is not the time to buy. I would think 2015 would be the time to sell. 2017 could be the time to buy. I plan to rent until then.

  7. 7
    mike says:

    RE: Erik @ 6 – Problem is then the cash flow value of the rental properties will remain roughly the same, and I don’t see a whole lot of evidence that low end properties market value is wildly out of line with the cash flow value. That phenomenon is more prevalent on homes priced double or triple the median – and those aren’t where most investors parked their cash. I read that the institutional investors were primarily buying homes priced $150K or under, less than 5 years old in areas better than average schools – which if you’re familiar with the Seattle area market there hasn’t been anything like that around in the last 5 years, probably a lot longer.

    Whether house prices drop in the next recession is probably going to depend on when it happens and how long it lasts. Again I expect it to be highly uneven between neighborhoods since buyers self-segregated more the past few years. Owner-occupiers with the big down payments headed to the nicer neighborhoods to pick their bargains while buyers with less competitive, weaker offers went elsewhere. Not saying that’s a hard, fast rule but it seemed to be a trend lately.

  8. 8
    Erik says:

    RE: mike @ 7
    Maybe you are right. It’s not like investors bought at the bottom for $92k and are seling for $233k. Prices havent shot up that much!

  9. 9
    Plymster says:

    Wall street is already “dumping”… http://www.salon.com/2013/11/06/wall_street_slumlords_outrageous_new_scheme_how_they_could_wreck_economy_again

    So far, Fitch is refusing to rate these new securities…

    And single-family rentals could fare poorly in an economic downturn, if prospective renters lost their jobs and could not afford to live on their own. With Wall Street owning the newly vacant properties, they could react to a downturn by liquidating them to pay back the bondholders. “The impact of a large scale listing at the neighborhood level could have a significant impact on market clearing prices,” Fitch writes…

    But barring collusion from the ratings agencies again, Wall Street can package these up claiming that vacancy rates are 3% when they’re actually much higher, defer maintenance, defer tenant removal for non-payment, etc. There are a thousand ways to skim off this scam, and the DoJ has demonstrated that it will pursue no criminal charges for willful fraud, and fines for pennies on the dollar.

    This has two very bad implications:
    1. Wall Street will hand off yet another bag of incorrectly rated Rental Backed Securities (RBS) to gullible investors (if they’re smart, they’ll call them something else, like “Tenant Cashflow Notes” or “Rental Inventory Bonds”).
    2. The Government will have to come to the rescue again and buy up RBS to keep property values from collapsing in the new slums neighborhoods (another version of TBTF).

  10. 10
    mike says:

    RE: Plymster @ 9 – This analysis suffers from the same problem as the “student loan debt” bubble scare – the total volume and value of the assets at risk is far too small to cause a significant market disruption without a whole lot of other problems happening concurrently.

    From the numbers cited in the article, 250,000 resale homes nationwide represents less than 3 weeks of inventory even if it was all dumped at once. The real # would need to be in the 2 million+ range to have much effect, and then there’s still the improbability that all tenants would be kicked out and the houses sold within a 12 month period. Could happen, but it doesn’t look likely.

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