Shrinking inventory may raise prices again

WASHINGTON – Jan. 28, 2015 – For the first time in 16 months, the total inventory of U.S. homes available for sale dropped in December, according to the National Association of Realtors®. While the decline was slight – less than 1 percent month-over-month – the drop does represent "a reversal to the general growth of listings that had been occurring throughout 2014," writes Lawrence Yun, NAR's chief economist. "More inventories are needed, not less. Or else, home prices could re-accelerate."

In Florida, the inventory of homes for sale fluctuated between a low of 104,339 in January 2014 to high of 108,105 in October, according to monthly numbers released by Florida Realtors Industry and Data Analysis Department (IDA). However, the inventory declined after October. Month-to-month, the number of active listings dropped about 0.5 percent month-to-month in November and another 2 percent month-to-month in December.

In addition, Florida patterns don't always follow more general U.S. fluctuations. In December, the inventory of Florida homes was up 1.2 percent year-to-year.

Nationwide in December, however, 1.85 million homes were listed for sale – an 11 percent drop from November and 0.5 percent drop from year ago levels, according to NAR housing data. A drop in inventory is common from November to December, but Yun notes "what is of interest is the year-over-year decline in inventory because this hints at possible acceleration in home prices in upcoming months."

In December, the month's supply of existing-homes on the market was 4.4 months; 6 months is considered healthy by most economists' standards.

U.S. home prices may have already begun "re-accelerating" in some markets, Yun suggests. In spring and summer last year, the median price was rising at 4 to 5 percent. In November and December, prices rose by 6 percent.

In Florida, median home prices rose in November rose 3.5 percent year-to-year; in December home prices rose 6.9 percent over the same year-to-year timeframe.

Source: "Shrinking Inventory," National Association of Realtors® Economists' Outlook Blog (Jan. 26, 2015)