Anemic Listing Growth in February

Let’s take a closer look at how listings fared in February of this year compared to years past.

Here’s a view of how inventory has grown so far this year:

On-Market Inventory Growth: 2000-2013

Compared to last December, the growth of on-market inventory is at its best point in three years. Unfortunately that isn’t saying much. The anemic 1.3 percent increase is still far smaller than the 14 percent average growth we saw before the housing bubble popped.

Next, here’s how many new listings hit the market, comparing 2014 to every year I’ve got data for.

Total New Listings: February 2000-2014

For new listings, this February was the worst on record.

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

Still just slightly in the red on this measure.

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 were nearly unchanged from January to February.

So far this year is definitely shaping up to be another frustrating year for buyers hoping for good selection.

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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.

18 comments:

  1. 1
    mike says:

    If the inventory shortage continues, I would not be surprised if we get another year of double digit price appreciation in the core neighborhoods with the greatest inventory constraints. I would not expect to see the same in areas where new construction SFH’s make up a significant percentage of sales.

    In Seattle city and certain portions of the Eastside, I expect we’ll see a steady if not increasing number of people who relocated and decided to rent for a while jumping in to the buyer pool. If I’d move here a year ago and decided to wait it out and rent, the continued low inventory – and in some cases drastically lower inventory along with higher prices – would be an incentive to buy now rather than rent for another year. That may sound illogical, but if your intent was to buy a year ago and you waited, there’s very little evidence that waiting even longer will produce a better outcome.

  2. 2
    herrbrahms says:

    Higher mortgage interest rates are cutting down the incentive for potential sellers to put their homes on the market. If trading up your home means trading a 3.5% interest rate for 4.5%, a lot of your purchasing power vanishes immediately — before you even start talking about the real estate excise tax, realtor fees, moving expenses…. Only growing families and people moving for work will have those deep incentives to move.

    Buyers are going to be chasing fewer and fewer properties this spring, which might lead to continued appreciation. New housing supply is quite limited at the moment.

  3. 3

    There’s Two Sides to Chronic Inventory Woes in Seattle

    Supply and qualified demand [?] says prices go up.

    Low inventory could also mean retirees [a lion’s share of Seattle home owners, the only ones decades ago that could barely afford to buy in, even then] are battonning down the hatches to scrimp by on 0% 401Ks…..I imagagine when they finally do sell, their homes won’t have a lot of tender love and care into them either……how could bankrupt retirees, especially with health conditions, afford maintenance? Sometimes the families fix their parents’ homes up, assuming they can afford to fix their own homes up too…LOL

    I know a lot of retirees that want back into the job market because retirement life has recently degraded way too frugal, especially paying for Medicare supplements [pretty much mandatory now if you want to see most doctors]. That $3-400K retirement annuity is a joke now….

  4. 4

    RE: softwarengineer @ 3 – Who’s Slowing Down Inventory in Seattle?

    Take a look at this guy trying to make ends meet with “in-home care givers” or like $100K/yr assisted livings homes or just stay put with your Ballard home with a “life alert” radio button?

    http://info.daystarseattle.com/senior-living-blog/?Tag=Cost%20of%20Senior%20Living%20Communities%20in%20West%20Seattle

  5. 5

    The number of “stale” listings early 2013 is amazing, but not surprising. Even short sales were being grabbed up as quickly as possible back then.

  6. 6
    Kyle says:

    RE: mike @ 1

    Its hard to believe that prices will keep going at this pace but I think you’re right. I can’t think of a good reason why they would slow. Clearly demand is greatly outpacing supply. I’d put my house on the market now, but where would I go? At some point ill say “screw it” and just figure it out. But I’m probably 20% away from realistically doing that. Be interesting to know what other people’s number is.

  7. 7
    mike says:

    RE: Kyle @ 6 – Honestly, I’m a bit shocked at how the inventory/price situation played out over the past 2 years. I bought in summer 2012 based on the assumption that inventory wasn’t going to improve by winter (based on the yearly trend) – I found a house I liked and bought it. I didn’t expect inventory to drop as far as it did. But here we are. Perhaps I sound like a housing bull now with some of my comments (channeling Meshugy) and that’s not the case. I report what I see. If things turn down again, I won’t be surprised unless it bucks a major trend. A number of posters here (Erik in particular) seem to think the market will spin off into another historically unprecedented downturn. It could happen, but I also don’t play the lottery.

  8. 8
    Corndogs says:

    You’re shocked? All any of you had to do was realize that Corndog is far and away your intellectual superior and yo just needed to listen to every word he said as if it were God himself talking to you and then you would know everything you need to know. Your arrogance in placing misguided faith in your own reasoning skills is your undoing. Inventory has gone nowhere. Corndog has explained why that would be the case. All you needed to do was stay in the nest and swallow those regurgitated worms daddy bird was feeding you all along… it could have been so simple.

  9. 9
    Tim Deerhawke says:

    For the moment, a lot of the people coming into the area are going into the rental pool. That is the for-sale housing market’s buffer. But in case you haven’t noticed, all those new apartments are at $2.50 per square foot — and up. That puts a 1000 sf 2 bedroom at $2500 per month (plus parking plus storage, etc). Eventually people get settled into their new job at Amazon and get tired of renting an apartment.

    On Wall Street, they say people are motivated by fear or greed. Right now it seems a lot of buyers are starting to give up on their fear of being caught by another big housing downturn. They are now acting out of fear that they will miss the boat as prices and interest rates rise. The result? In the last couple of months, two houses in Tangletown that were reasonably priced got multiple offers and sold for more than $100k above list.

    I think the only thing that could keep this market from 8-12% price increases this year is either 1) a very substantial drop in rents because of overbuilding in the apartment market or 2) another black swan event.

  10. 10
    Erik says:

    RE: mike @ 7
    I am not sure the market is going to turn down. A huge problem with that theory is the law of supply and demand. Right now, there is way more demand than supply, which would put upward pressure on housing prices. Some of my prediction is wishful thinking. I think if prices go down, it could very well go down in 2016. I think I need something to happen in the world in order to spring my claim. Since presidential elections are 2016, that is the most likely time something will happen. There are some smart people that think 2016 will be a time when prices go down as well.

    RE: Corndogs @ 8
    You are not intellectually superior. Anyone with a little reasoning skills could tell supply would stay low this year. There were tons of buyers waiting on the sidelines and giving up on buying last year. There are still a lot of buyers waiting to buy i’m sure. Tim showed that graph predicting inventory would sky rocket thought the stratosphere and all the programmers jumped on board. A more complex question is where are housing prices headed. Do you still think prices will slowly creep up approximately with inflation for the next 5 years? You did say that at one point.

  11. 11
    Mike2 says:

    Would be curious to see what rents are doing so far this year. The biggest contributor to the double digit run-up in prices last year I think was that rents were doing the same thing. When owning is roughly the same cost (on a full PITI basis) as renting and folks get a major rent increase for the second or third year in a row I have to imagine that inflates the buyer pool as folks look to lock in their costs (and their maintenance obligations, but nobody really thinks of that piece). Inventory clearly just sucks right now, but if rent increases have abated somewhat then I think the potential buyer pool won’t feel quite the pressure to go out and grab whatever it can find for a price well above asking. If landlords are still jacking rents up 5-10%+/year though, especially in the much thinner SFR rental market in the urban core areas, then I’d expect another crazy year in 2014 for prices.

  12. 12

    By Corndogs @ 8:

    You’re shocked? All any of you had to do was realize that Corndog is far and away your intellectual superior and yo just needed to listen to every word he said as if it were God himself talking to you and then you would know everything you need to know. Your arrogance in placing misguided faith in your own reasoning skills is your undoing. Inventory has gone nowhere. Corndog has explained why that would be the case. All you needed to do was stay in the nest and swallow those regurgitated worms daddy bird was feeding you all along… it could have been so simple.

    hu·mil·i·ty noun \hyü-ˈmi-lə-tē, yü-\
    : the quality or state of not thinking you are better than other people : the quality or state of being humble.

  13. 13
    mike says:

    RE: Corndogs @ 8 – Please point back to where you made specific predictions about the zip code I’m in – 98117. The situation here is far different than most areas, so you presumably picked this out at some point, no?

    RE: Erik @ 10 – were you not the erik that recently stated 25-40% declines by 2015?

    RE: Mike2 @ 11 – I think the rent increases were a symptom of the same problem, years of underbuilding compared to population growth in many neighborhoods. With prices and interest rates where they are, I don’t see owning as a viable means to lower housing costs. 2 years ago, with 20% down and 3.625% my mortgage was roughly equivalent to rent on a similar house. Throw in another $1000/month average on repairs and maintenance and it’s not so favorable.

  14. 14
    Tim Deerhawke says:

    To answer Mike’s question, somebody out there must have access to Dupre & Scott’s rental report. Anecdotally, I know two guys who have multiple rental units who have raised their rents to on average 5% above where there were at the peak in 2009 (when rents cratered). And now they are talking about tenant notification procedures so they are considering a 10% increase or more. It seems crazy but I have a rental in Greenlake that went from renting at market rates 18 months ago and is easily $300 below market now– nearly 14% below the comps.

    I still see the apartment market being hugely overbuilt, but maybe that realization is still a year or two away. In the meantime, I don’t really see rents putting any real downward pressure on the for-sale real estate market.

    The graphs above are interesting to me because of the clear trend line they show. On-market inventory growth is not moving. New listings at the lowest level in 14 years. Stale listings at their lowest sustained level on the charts. New listings minus pendings in negative territory.

    All in all what this gives us is a picture of a market that has been eating up the overhang of inventory left from the recession and now has no reserves left. The market is barely bringing on enough new inventory to meet the most basic level of demand.

    Without sufficient supply, sales are bound to be suppressed. But in the meantime, it is hard not to be believe that prices are going to jump.

  15. 15
    herrbrahms says:

    RE: Tim Deerhawke @ 14

    Very astute analysis, Tim. I wonder what percentage of the current crop of buyers are in the market because of repeated rent increases rather than by their own initiative.

  16. 16
    Tim Deerhawke says:

    We have a fairly basic problem in assessing supply and demand in this market.

    We can measure supply fairly well with the graphs that Tim has given us above– onmarket listing growth, new listings, listings minus pendings, stale inventory, etc. Supply we can measure pretty well.

    How do we measure demand? Pending and final sales. Anything else is much more anecdotal and therefore more hit-and-miss. Multiple offer situations (which are not really well documented). Sales over listing price (not well documented). Sales as a percent of listing price. That is pretty much it unless you look at prices– and that is always seen in retrospect.

    There is an inherent problem of using sales to measure demand. When we see that sales are flat or down, the newspaper reports that the market is not doing very well. We say the real estate market is in the doldrums. Or we make up completely random explanations for slow sales like the weather or the Superbowl effect.

    In fact, part of the reason that we have stunted sales growth right now is there is a plain lack of things to buy. It is kind of like the old Soviet Union. There was plenty of demand, but if you went into a store and the shelves were empty, you might turn around and head back out the door too, right?

  17. 17
    Tim Deerhawke says:

    We have a fairly basic problem in assessing supply and demand in this market.

    We can measure supply fairly well with the graphs that Tim has given us above– onmarket listing growth, new listings, listings minus pendings, stale inventory, etc. Supply we can measure pretty well.

    How do we measure demand? Pending and final sales. Anything else is much more anecdotal and therefore more hit-and-miss. Multiple offer situations (which are not really well documented). Sales over listing price (not well documented). Sales as a percent of listing price. That is pretty much it unless you look at prices– and that is always seen in retrospect.

    There is an inherent problem of using sales to measure demand. When we see that sales are flat or down, the newspaper reports that the market is not doing very well. We say the real estate market is in the doldrums. Or we make up completely random explanations for slow sales like the weather or the Superbowl effect.

    In fact, part of the reason that we have stunted sales growth right now is there is a plain lack of things to buy. It is kind of like the old Soviet Union. There was plenty of demand, but if you went into a store and the shelves were empty, you might turn around and head back out the door too, right?

  18. 18
    Michelle says:

    Yes property buying and selling has been anemic for months now as it’s continuing to be a renters marketing and the cost of purchasing a home or property with the owner’s wages has remained stagnant as well. Upkeep is also a big issue and while it’s a dream to own a home, more incentives and discounts should be put in place to motivate individuals to do so.

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