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Friday, July 27, 2007

National Housing Statistics: "Just the Facts Ma'am, Just the Facts."


It was February, 2007 when we last summarized housing statistics. In that posting, we attempted to clear away the debris and the spin by reducing the national market to a simple picture of current supply and demand factors.

Most of us learned the law of supply and demand before exiting the eighth grade, so here goes with the numbers that came out this week nationally. Needless to say, it is still a buyers' market.

Supply Factors & Sellers' Collective Psyche:

Inventories: aka, number of homes on the market. Lots of inventory on the national market. For June, 2007, there were 4.20 million homes, representing an 8.8 month supply. The highs for 2006, (PDF file),were basically a toss up for July or October, with only 3.86 million homes representing a 7.4 month supply.

Thus, national inventories are 8.8% above last year's highs, while the number of months supply is 18.9% above 2006 peak numbers. Not good news for sellers who would like to see inventories decline.

Permits Starts and Completions: The most recent data, (PDF), is somewhat dramatic, and makes the point that builders are throttling back. This is probably a response to declining revenues, as well as an attempt to reduce inventories. June, 2007 showed 1.406 million new permits, which is 25% less than a year ago. Housing starts were at 1.467 million, or 19% less than last year, while completions came in at 1.470 million, 28% less than last year. Until completions outnumber the new starts, inventory levels will remain high.

DEDUCTIVE CONCLUSION: Inventories continue to rise, despite drastic declines in the permits indexes from the previous year. This must mean that demand continues to fall, but at a higher rate.

Demand Factors & Buyers' Behavior

Mortgage Rates: A new 11 month high. It has been more than three years since increases of this magnitude have been seen. One would expect to see a decline in mortgage applications from this data, a definite indication of falling demand.

Mortgage Applications: One always needs to look closely at this report. Sometimes applications will rise, making it appear that demand is doing the same. What needs to be considered however, is to remove the number of applications that are due to refinancing alone, and thus are not an indication of new buyers or higher demand. In 6 of the last 10 weeks, applications have been down or at best, unchanged. The most recent weekly report shows yet another decline.

New Residential Sales (PDF): From, June, 2007 showed 843,000 sales, down from a May, 2007 level of 893,000 and down 21.4% from 1,073,000 units in June, 2006.

Existing Home Sales: For June, 2007, these sales declined to 5.75 million units, and are 11.4% below the 6.49 million-unit pace in June 2006.

No amount of spin can call this anything but a very soft, buyers' market. Still, nationally and locally at times, we see that prices appear to have risen. The conventional wisdom on this fact is that current conditions have impacted entry level buyers to a greater degree than others. Thus, the homes that do get sold are at a higher price, so when averages are compared with a year ago, prices will "appear" to have risen.

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Blogger jason said...

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7:21 PM  

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