Modeling, Analytics and Business Intelligence

Existing Homes Inventory: No Let up

Posted in Economy by Sanjay Bapna on January 6, 2009

November 2008 data from National Association of Realtors suggests no let up in the inventory of Existing Homes. On a YoY basis, Inventory is up by 10.9%.  The inventory for the lean Nov. month stands at 11.2 months of supply.  Historically, the inventory has been less than 5 months. 

The economic ramifications of the inventory is critical. Large supply decreases prices of homes. The decrease in the price of homes increases the Loan-to-Value (LTV) of a home. LTV is highly correlated with loan defaults. Loan defaults are highly correlated with “putting further pressure on” home prices and thus the cycle feeds on itself.  Unless the cycle is stopped (e.g., by wage increases, stimulus spending, direct intervention to help those defaulting), the economy will rest on shaky foundation.

Exisiting Homes Inventory. Nov Data is preliminary.

Existing Homes Inventory. Nov Data is preliminary.

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2 Responses

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  1. Sanjay Bapna said, on January 6, 2009 at 12:53 pm

    Housing market could go down another 20% – Shilling.
    Shilling has been a bear for a long long time.

    http://finance.yahoo.com/tech-ticker/article/153388/Shilling-Housing-Market-Could-Fall-Another-20-Percent?tickers=%5Edji,%5Egspc,%5Edia,spy,qqq,kbh,len

  2. Sanjay Bapna said, on January 6, 2009 at 2:23 pm

    Economic Forecasts from NAR here:
    http://www.realtor.org/wps/wcm/connect/fdc708004c910d10a21aa778e322d571/research__forecast0109.pdf?MOD=AJPERES&CACHEID=fdc708004c910d10a21aa778e322d571

    Q2 2009 is the bottom according to their forecasts.


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