Signs of Improvement in the Housing Market

Scott Grannis has a financial blog we follow regularly called the Calafia Beach Pundit. An entry today addresses the housing market with an interesting statistic from the National Association of Realtors (NAR). It shows the supply of unsold homes has declined significantly in the past year and is now down to about a 6 month supply.

Around 2002, it was as low as 4, but has more recently been as high as 12. We continue to hear that banks are carrying a supply of REO (foreclosure) homes that, if they dump on the market, will depress sales. (More information)

But with continued low interest rates, improving sales, and slower growth in new homes being put up for sale, the blog makes the case that the market is clearing and has been for several years. While many buyers are taking advantage of low prices, others are still on the sidelines waiting for things to pick up.

As Mr. Grannis points out, the pick up is usually not so visible until it is well underway. At that point, prices and interest rates start to rise and buying sentiment may overcome any new supply the banks dump on the market.

We are certainly seeing this pattern here on the Big Island, where buyers are snapping up great deals and inventory continues to shrink. 2012 may be the year that the 5 year downturn in housing here began to turn around.