Thursday, June 6, 2013

Latest inventory numbers: big month-to-month gain, but inventory still down year-over-year

As reported in the Denver Post recently, MLS released some new numbers on the inventory of homes for sale:

The number of homes for sale in metro Denver increased by 18 percent from April to May, a situation that will help homeowners and buyers, independent real-estate analyst Gary Bauer said Wednesday.
Yes, that's true. In the Metrolist data,  inventory did increase from April to May, as it usually does, due to seasonal factors. The question remains as to whether or not the increase is unusually large for the time of year and if there is an increase year over year. 

To find another source for similar data for comparison purposes, we turn to The Department of Numbers, which has been posting inventory data since 2006.  We do see that inventory in the metro Denver area increased 5.2 percent from April to May. This is indeed one of the largest month-to-month increases we've seen in several years. A month-to-month jump of more than 4 percent has been pretty rare since 2008. From April to May 2013, inventory increased from 10,249 to 10,791. So, it does seem that there is some real growth in inventory over the past month or so. The first graph shows the total number of homes for sale for each month since April 2006. Obviously, the inventory is way down from the boom days of 2006 and 2007. 
On the other hand, the year-over-year comparison continues to show that inventory is still declining in some measures. The second graph shows the year-over-year changes for each month, and in May 2013, the total inventory, which was 10,791, was down 28 percent from May 2012's total inventory, which was 15,114. Year over year changes have shown repeated declines since 2011 in the Denver area. 

Naturally, in a situation with flat or increasing and demand, plus declining supply, prices will head upward quickly. Demand is being repeatedly stimulated by monetary easing by the Fed, through low interest rates, and through other avenues designed to increase liquidity for homebuying. So, there's plenty of demand, even in an economic environment that shows few big gains in wages and income. The third graph shows the median asking price for homes in metro Denver according to The Department of Numbers.

We can see that from May 2012 to May 2013, the median asking price rose 10.4 percent from $297,975 to $329,100.