List Prices Have Increased, But Inventory Remains Low
Housing inventory across the country is down. If you’re in the real estate business you probably know this. If you aren’t, it might come as a surprise; there are simply fewer homes going on the market than there were a year ago, or even two years ago.
At the same time, housing prices have not dramatically increased. With fewer homes on the market, list prices should rise as more people compete for a smaller amount of property.
It’s a head scratcher. CoreLogic has a theory for one part of the problem. Economists at the Californian company argued price declines are keeping sellers off the market. The company found the supply of homes for sale drops as the number of homeowners who owe more than their houses are worth rises.
“The presence of negative equity not only drives foreclosures, reduces the availability of purchase down payments and impedes refinances, but also restricts the ability of owners to list their homes for sale as the demand side of the market improves,” CoreLogic wrote in its most recent economic report.
The Wall Street Journal added a few more reasons for low inventory. Theses include:
- an influx of investors buying distressed properties; and
- banks have slowed their foreclosures process.
Recently, Movoto Real Estate researched the 50 largest cities in the country to see just how low inventory has dropped in the past year and whether list prices have truly remained flat. What we saw was in cities that have been most affected by low inventories, list prices are starting to creep back up.
Below are five cities that have been hit hardest by the inventory decline. To come up with the figures we looked at the current inventory in each city as of June 19 and compared this figure to a year ago.
- Las Vegas, NV
Compared to this time last year, inventory in The Entertainment Capital of the World is down 66 percent. At the moment there are 3,278 homes on the market–a far cry from the 9,704 homes on the market a year ago. According to our data, inventory has dropped steadily since July, 2011.
- San Francisco, CA
Inventory in San Fran is down 65 percent compared to last year and 66 percent compared to the year before. Right now there are 693 houses on the market. A year ago there were 1,885.
- Miami, FL
Miami’s inventory has been hit hard. There has been a 62 percent decrease in the number of homes on the market compared to this time last year. In 2011, there were 13,767 homes on the market, compared to 5,274 on the market at the moment.
- Fresno, CA
Compared to a year ago Fresno’s inventory dropped by 52 percent. In 2011, there were 1,583 homes on the market. Currently, there are 753. Just as interesting, Fresno’s inventory has dropped even compared to six months ago. Six months ago there were 1,267 homes on the market.
- Oakland, CA
In the past year inventory in Oakland has dropped dramatically. Today there are 626 homes on the market. This time last year there were 1,245 homes on the market. This is a 50 percent decrease.
Supply, Demand, and Median Price, Oh My!
This is only the tip of the iceberg. In nearly all of the top 50 cities, inventories declined. If we believe the data, this indicates that nationally, it should be a sellers market. In other words, more people are competing for a smaller set of houses. With more people competing for housing, the median list price of each house should, on a theoretical level, increase. In some areas this held true. In others it didn’t.
Below are five cities with an inventory shortage that have seen an increase in the median list price of houses on the market.
- Las Vegas, NV
In the past two years Sin City has seen a large increase in the median list price of homes for sale. Compared to a year ago the median list price is up 40 percent. Compared to two years ago the median list price is up 48 percent. This is a gain of $48,950 in the past year. Maybe it’s time to take a gamble on the market.
- Phoenix, AZ
A year ago the median list price of a house in Phoenix was $109,000. Today the median price is $142,000–up 30 percent. More telling, the list price is up 18 percent compared to two years ago. In the past year the median list price has increased $33,000.
- Mesa, AZ
America’s table has seen serious improvements. Compared to two years ago, the median list price of a house is up 10 percent. Compared to a year ago, home prices are up 25 percent. This means the the list price has increased by $29,373.
- Miami, FL
Miami’s median list price has steadily risen in the past two years. It’s up 30 percent compared to two years ago, 23 percent compared to a year ago, and 14 percent compared to just six months ago. The current median list price is $245,000. In the past year, Miami list prices have gained $46,000.
- San Francisco, CA
The Giants’ home turf is up 11 percent compared to two years ago and 19 percent over last year. Something we find extraordinarily interesting is the median price range of a San Fran listing has significantly increased. The current list price is almost a quarter higher than it was six months ago. Overall, in the past two years the median list price has increased by $126,000.
The Take Away: Hold Your Horses
We are seeing a gradual increase in the prices of homes in areas that have been most affected by low inventory. This could be an indicator the housing market has finally pulled out of its slump. We’d like to think so. But we’ve been burned before. We’ll say we are cautiously optimistic.