Inventory's at a low, but is it scarcity? No

Source: Wall Street Journal

Housing inventory dropped for the fourth straight month, falling in August to the lowest level of the year.

The number of homes listed for sale in August fell by 1.9% from July. Overall, the number of homes listed was down 19% from one year ago, according to data from Realtor.com.

The 2.27 million homes listed for sale was the lowest of the year. Inventories tend to increase by around 2% in August over the past 28 years, according to Zelman & Associates, a research firm, as sellers make one last push before the beginning of the school year.

The Realtor.com figures include sale listings from more than 900 multiple-listing services across the country.

The data show that the summer selling season drew to an early close, as consumer confidence sustained multiple shocks from the debt-ceiling drama, the eurozone crisis and the stock market volatility.

Normally, a decline in inventory would be a positive sign, but in the current market, that isn’t necessarily the case. Instead, low sales volumes and declining inventory suggests that there aren’t many opportunities for “price discovery.” The upshot is that buyers and sellers, uncertain about whether they’re overpaying for a home or under-pricing the one they’re selling, are further frozen on the sidelines.

Moreover, there’s still millions of properties in some stage of foreclosure or where borrowers have missed three or more straight mortgage payments. This “shadow inventory,” plus sellers that are waiting on the sidelines until demand picks up, will loom over housing markets for years.

Housing inventory was up in just 15 of 146 markets for the month, and only three metro areas—Denver; Hartford, Conn.; and El Paso, Texas—posted year-over-year increases in August. The biggest declines came in Miami (down by 48% from one year ago), Orlando (-46%), and Phoenix (-45%).

Realtor.com found that for-sale listings fell in every Florida multiple-listing service. The declines could be a sign of improvement, but they may also be skewed for foreclosure-processing difficulties that have forced banks to sharply slow down foreclosure re-sales.

Median prices were unchanged from July nationally, and were up by 0.5% from one year ago.

For the past year, median listing prices are also up most sharply in four Florida markets, led by Fort Myers and Cape Coral, where asking prices jumped by 33%. Other gains included Miami (25%), Naples (20%) and Punta Gorda (13.3%).

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