The inventory of new homes for sale reached its lowest level in 50 years, lower than existing homes, and pushed new home prices higher to drive the real estate market, according to Pro Teck’s October Home Value Forecast Update.
Months of remaining inventory of new homes listed for sale is close to its lowest level at 4.5 months and nationwide new home prices have held up much better than existing home prices. While new and existing home prices have tracked one another closely since the 1960’s, there has been a more notable divergence in the recent down-cycle.
The most recent monthly median new single family price of $256,900 is down less than 1 percent from the peak reached in 2006. In contrast, the nationwide median existing single family price of $183,900 is down 20 percent from its July 2006 peak.
“The U.S. housing market has entered a sustainable period of improving conditions led by very low mortgage rates, stable to rising home prices, declining unemployment, declining housing inventories and a strong rental market,” said Tom O’Grady, CEO of Pro Teck Valuation Services. “As real estate has historically been one of the most important leading indicators of economic activity, this has positive implications for the economy.”
The October Home Value Forecast Update shows the inverse correlation between the inflation-adjusted median single family price annual percent change and months of remaining inventory of new single family homes back to 1972. The authors determined that low inventory levels, as is currently the case, always have been associated with significant price appreciation in the following year.
“The primary reason for the low months of remaining inventory for new single family homes is the historically low number of new homes for sale,” added O’Grady. “In recent years, new housing supply has been running at the lowest levels since the 1960’s due to the slow down in new home construction, the size of homes being built, and the complicated process for selling/buying distressed properties.”
This month’s Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model.
“The top ranked metros are located in Texas and one is in Oklahoma, which confirms the strength of the real estate market in this part of the country,” said Michael Sklarz, Principal of Collateral Analytics and contributing author to Home Value Forecast. “Also, one thing that all these markets have in common is that they all have experienced significant declines in active listing counts over the past year, which leads to fewer months of remaining housing inventory and tighter markets.”
October’s top 10 CBSAs: Seattle-Bellevue-Everett, WA; Oxnard-Thousand Oaks-Ventura, CA; Santa Ana-Anaheim-Irvine, CA; Boston-Quincy, MA; Oklahoma City, OK; Houston-Sugar Land-Baytown, TX; Fort Worth-Arlington, TX; San Antonio-New Braunfels, TX; Raleigh-Cary, NC; and Dallas-Plano-Irving, TX.
“Local, not regional, economic issues are having the largest influences in the bottom-ranked metro areas this month” added Sklarz. “However, many have high months of remaining housing inventory with several in the double digits. Yet we are seeing positive trends in the bottom ranked list – such as the declining number of days for sale on the market in some areas.”
The bottom CBSAs for October were: Portland-Vancouver-Hillsborough, OR-WA; Minneapolis-St. Paul-Bloomington, MN; Clarksville, TN-KY; Port St. Lucie, FL; Bridgeport, Stamford, Norwalk, CT; Greenville-, SC; Newark-Union, NJ-PA; Augusta-Richmond County, GA-SC; Little Rock, North Little Rock, Conway, AR; Huntsville, AL.
Home Value Forecast was created from a strategic partnership between Pro Teck Valuation Services and Collateral Analytics. HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs. Home Value Forecast delivers a monthly briefing along with “Lessons from the Data,” an in-depth article based on trends unearthed in the data.