Geoff nailed what may be a big feature in the next credit mess. Condo sales were down and the condo inventor rose by almost a full months' sales. The pipeline of multi-family construction is longer. Starts may have fallen more or less in tandem with single starts, but I suspect (and am too lazy to check right now) that multi-family completions still have some catching up to do. That bulge in condo inventories may well represent completions of big projects. More of that to come, I suspect.

Bloomberg reports today on credit protection for commercial real estate loans. Costs doubled over the past month. Our host has been warning us about the coming stink-storm in the real side of the business. Given the truly terrible lending standards in the commercial mortgage market, trouble on the real side will mean trouble on the finance side, too.

I don't see how the months of supply number can go down substantially until prices drop at least 20% on average. At the current pace, I don't see this happening for 3 or more years. In fact, I suspect it will only get worse as the bulk of foreclosures will likely occur in 2008 and 2009.

CR,
Does the months of supply graph include REO properties?

More later today on existing home sales.

ahhh, the hook !

selling no longer necessary, were all rabid cr addicts!

I like the style with which you present this data, always the exact same words, it's better to have things very orderly, this way the main points stick with the readers.

And July was the peak in inventory, as I predicted. This is turning into a collapse, remember listings will fall as real estate brokers close and pull back. They will only spend the money listing and promoting what will sell. I predict a lot more desperation coming soon.

The fallout from housing is going to take years to work out. Once again, we have had an immense party due to liquidity, and now the fed will mitigate the hangover. BTW- Arizona is facing YOY declines in tax revenues. The percentage gain model used for the last several years has just been chucked out the door. We had a bubble.

Someday this war's gonna end...

“For buyers who are into home ownership for the long term, housing still remains the best investment,” he concluded."

—Source: REALTOR® Magazine Online
Boom2Bust.com | Homepage | 11.28.07 - 10:37 am | #

Doublespeak extrodinaire.

If buyers who were into home ownership for the long term, didn't turn to housing as the best investment, what would they turn to instead?

Pork belly futures?

if the FHLB counts as part of the fed, than it's over 51 billion, according to schumer's take.

I think that true inventory figures are hard to determine,even assuming that MLS figures are accurately reported (a big assumption) adding FSBO that are not on the MLS and cancelled new home sales increases supply quite a bit.I do know that I am seeing some sales in my area of sonoma county,and also quite a few new "for sale" signs each week.When I go to Craig's list i see FSBO that are not on the MLS,however I can not tell if this is a local phenomena.speaking of "Busts" I would guess that plastic surgeons won't be as busy next year what with the Real Estate Babes being out of the market and MEW declining,short silicone?

I love waking up to this blog each day to see what you have for me. Thanks.

I would be really interested to see what your informed inventory model would suggest months of supply would look like in 2008, 2009, 2010.

I am not an expert here but my stab at it looks like this:

Year-end 07 inventory
+
New construction delivered
+
REOs
+
Existing houses put on market
minus
Total 2008 housing sales (new +existing)
equals
2008 end inventory

divide this by YE combined sales SAAR

Fiddling around with numbers that we have seen on this blog earlier this year and assuming we leave 2007 with 4.5 mln units of inventory, I see 1.1 mln new units built and 0.5 mln REOs in 2008.

I flatline the current 5.7 mln combined existing plus new-home sales.

The only way I get months of inv declining on a year-over-year basis is if 4 mln existing homes or less are put on the market. That seems pretty unlikely if we're talking 5 mln in existing home sales; you gotta figure 4 mln homes is close to the amount of structural price insensitive sales each year, to say nothing of other financially strapped forced sellers and others who want to lock in profits from today's high prices.

If I assume 5 mln existing houses added to the market each year, I'm getting an increase in "months of inventory" by two months in 2008.

A similar phenomenon happens in 2009 and 2010, as rising REOs of 0.8 mln and 1.5 mln offset a slashing of new home construction to 0.7 mln and 0.4 mln.

My own conclusion is that we need to see a pretty dramatic fall in prices to induce fewer homes added to the market (to get to 4 mln existing homes rather than 5) and more buyers. It also looks to me like the 1 mln SAAR for new home building is really going to kill the market, and it needs to pull back in a big way (like more than 50%).

Mudgeo