The inventory of listings of single family homes as aggregated by DISCERN data partner, Altos Research, has been in a downward trend this whole cycle in spite of the relative strength in prices and absorptions. We find this trend to be particularly interesting, prompting three useful questions:
1. While we have observed a fairly healthy recovery in housing prices this cycle, how much of the increase is a result of supply constraints vs. actual demand?
Until this year, unit demand has been fairly consistent, potentially suggesting supply was a bigger driver of price increases. We observed a meaningful pick-up in demand in 2015, potentially suggesting demand may have contributed in larger part to this year’s price increases than in previous years.
2. Given the price increases and apparent demand, why aren’t more homeowners listing their homes for sale?
Stringent lending standards, lack of viable job opportunities, lack of income growth and some anecdotal evidence that retired baby boomers aren’t downsizing all are likely contributing to the muted listings inventory growth.
3. How much of a runway does the lack of supply of homes for sale create for homebuilders in the years ahead?
With a shrinking supply of existing homes for sale, a general undersupply of housing and a growing number of household formations builders may be entering or already in a super cycle although credit availability for prospective buyers will likely be the determining factor.
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