Friday, January 16, 2009

The Lumpiness of Housing Inventory

There is an excellent post on TraderFeed describing variations in housing inventory between markets and price ranges:

Someone recently told me that my own local housing market in Naperville, IL is in relatively good shape because there is only about one year of inventory for sale based on 2008 sales figures. If, however, we break down the inventory by price (see chart above), we again see evidence of lumpiness. There is little inventory problem at the lower end of the housing spectrum; speculation in that market had centered on the luxury end, where there is more than 3 years of inventory. At year end 2008, annual sales of homes above $1,200,000 in Naperville were 36, but 114 homes were on the market. Stated otherwise, about 3% of housing sales in that market have been above $1,200,000, but 15% of the inventory is priced at that level.

I touched on this point in my post suggesting we can't just assume excess inventory is a result of overbuilding, but Brett provides much more detail on the variable mismatch between supply and demand between and within markets.