Wed Post #2: Lower total inventory doesn't mean improving market conditions

As we noted earlier today, yesterday was an interesting day in our Inventory watch on the side bar.

As the Inventory scroll states, "Inventory has probably now peaked for 2012 and we will see more and more listings pulled off the market in hopes the market will recover in the Spring. The main watch now is to see if we will have any days in the final two months where sales surpass the number of new listings for that day."

Yesterday almost achieved that historic first for 2012.  We came in with 114 new listings and 114 sales.

The broader story, however, is total inventory.

All month long inventory has been contracting. Some have fretted/rejoiced that this indicates the market is turning around.

Huh?

Consider that at the beginning of 2012, inventory sat at 10,671.  Current inventory is more than 65% above that level right now.

The fact of the matter is that inventory historically contracts in October and carries on through to January, when listings begin to surge again back into the market.

Larry Yatkowsky tackled this issue on his blog and created the graph you see above.

As you can see, inventory is currently sitting at incredibly lofty levels, equal to where it was at the heights of the peak summer season in 2011 and 2010.

That's right... the inventory on the market right now is at the same level as we would normally see during the busy summer season in other years. As Yatkowsky notes:

The current decline seems like a slow slide. At its current pace it is not moving quickly enough to realign this market’s active listings with previous years.

Exactly.

Despite the traditional listings decline as we head into winter, Inventory is still at extraordinarily high levels.

These conditions recently prompted Richmond real estate agent Arnold Shuchat to observe conditions at the end of November are such that:

In house sales, volume is down 68.5% relative to last year and the median price is down 3%.  

In townhouse sales, volume is down 74.6% relative to last year and the median price is down 9.6%.

In apartment sales, volume is down 58.7% relative to last year and the mdeian price is down 16.5%

A continued erosion of price support and diminishing volume of sales will provide terrific buying opportunities for home shoppers.

Inventory, although lower, is still massively high for this time of year.

And it's effect on the market remains the same.

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