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Forget about prices, it's all about the inventory

Posted by Scott Van Voorhis December 23, 2009 09:57 AM

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We all know now home and condo sales skyrocketed in November, both here and across the country.

Thanks Uncle Sam for all those tax credits.

But a key, often overlooked stat, in gauging the future direction of the housing market, especially here in the Boston area, is the inventory of unsold homes and condos.

The 63 percent surge in Massachusetts home sales last month, as buyers scrambled to take advantage of the since extended tax credit, also helped take a lot of houses off the market as well.

In fact, the number of unsold homes - at 24,788 - has dropped to its lowest total since Nov. 2004, when the housing bubble neared its peak, the Massachusetts Association of Realtors reports.

That represents 6.5 months of supply, or down from more than a year's worth of unsold inventory that we saw back in 2008

It's almost exactly the same story with condos, with the 10,313 listings on the market representing 6.5 months worth of unsold inventory, down from more than 13 months a year ago.

As sales pick up inventory declines, prices are finally showing signs of stabilizing.

However, the big question now may be not so much where prices are headed, but instead what will happen with inventory in the coming months.

If the relatively modest number of listings just keeps shrinking, that will clearly put more upward pressure on prices.

A crucial factor is whether potential sellers who have been hanging back during downturn may start to put their homes and condos on the market.

During the market's darkest days last winter, only those who absolutely had to sell were selling. Foreclosures, sadly, also helped fill the pipeline.

That equation may already be starting to shift as sellers see a reasonable chance of success of at least finding a buyer. There's also the sweetener of the new, expanded tax credit, which offers a $6,500 tax credit to mover uppers.

Of course, we still have foreclosures, which appear to be spreading to prime borrowers as the jobless rate takes its toll.

But frankly, even with the ravages of the recession, the foreclosure situation is relatively tame in the Boston area compared to Sunbelt cities that went wild with all sorts of new construction.

Simply put, not a lot gets built here, even in boom times.

Of course, that means we can't depend on a surge of new construction to bail us out either.

So the buyers are back, even if they are bribed with tax credits. Now it's up the sellers to get back into the game and put more homes on the market.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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