Housing inventory has continued to drop in 2012, with year-over-year declines in May at 21 percent.
Inventory levels in the U.S. housing market are down 21 percent from last May, according to the newest statistics from Pro Teck Valuation Services.
A real estate valuation firm based in Waltham, Mass., Pro Teck said many of the most depressed local markets in the nation have been seeing increased home sales accompany the falling inventories.
Michael Sklarz, principal of collateral analytics for HomeValueForecast.com, singled out Michigan and Illinois in a HousingWire piece, saying that those states are defying their reputations as “foreclosure-riddled states” and have been making substantial strides in reducing their inventories.
Tom O’Grady, the president and CEO of the firm, said that the inventory/sales relationship is a significant one.
“One of the most important developments in the past year for the residential real estate market has been the significant decline in the inventory of homes for sale,” he said. “Nationally, the number of homes currently listed are down 21 percent from a year ago.”
And there is definitely a level of truth to O’Grady’s comments when the Chicago market is considered.
Eileen Romito, a broker associate with Coldwell Banker in Edgebrook, said the transformation has been dramatic.
“At the height, we had neighborhoods with 30 months of inventory or more, and at this point, several areas have 10 months of inventory or even as little as half of that,” she said.
That drop in inventory, Romito continued, has created a sales environment very different from the years following the downturn.
“The change I’ve seen is that my buyers have less to choose from than they would have had 2 or 3 years ago, but at the same time the prices are much lower,” she said. “Because of this dynamic, many of the most desirable listings are sold quickly with multiple offers.”
And finally, the rental markets are the most competitive in years, and as we continue to report, that too adds to the demand for housing.
“[T]enants (are) fighting tooth-and-nail for the good apartments,” Romito said. “As that happens, we’re finding many would-be renters deciding that maybe they should buy after all, rather than overpay for an apartment.”
Interpretations differ on how many months supply represent a healthy real estate market, but the consensus is generally around five to six months. In its analysis, Pro Teck stated that five months or less indicates a strong market, and the U.S. market’s current level of 6.3 months is its lowest level in six years.