Housing inventory came down a bit in May, but not enough to put a real foundation on faltering home prices. ZipRealty reported “the supply of homes available for sale in 28 major metropolitan areas at the end of May was down 3.9% from a month earlier.”
ZipRealty figures do not include many house in foreclosure because banks have not put all of them on the market.
The slight improvement in the inventory of homes is misleading. There is no evidence that home prices have stopped falling. Government figures show that even homeowners who renegotiate mortgage payments to lower amount end up defaulting in record numbers. Unemployment is likely to hit 10% by Labor Day and many economists expect it to stay at that level into next year. Rising joblessness almost certainly means more abandonment of homes.
Another factor which was not part of the housing price picture two months ago is the rising cost of energy. For households living on the edge of their financial capacity, a sharp increase in the cost of heating oil and gas may make money for mortgage payments harder to come by.
Inventory in some areas of the country where home prices are down 50% or better from their highs may be bringing speculators and a few intrepid buyers into the market. Low mortgage rates have probably helped those trends. The tiny improvement in inventories is likely to be short-lived. All other economic indicators point to a deteriorating base of people who can buy homes.
Douglas A. McIntyre
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