The housing inventory problem, writ small

I've posted a lot about my "big picture" take on housing, especially the inventory problem. Put simply, we have an Everest-sized mountain of homes for sale, both new and existing. That's going to take a long time to work through, even if demand remains stable.

I want to bring that down to the micro level today. I've been tracking how many homes are for sale in my zip code since June 2005. I use Realtor.com, asking every few days how many homes are for sale with at least 2 bedrooms and 2 bathrooms in a price range of $100,000 to $500,000. That's a good chunk of the low-to-mid-end of the market here in Northern Palm Beach County, FL.

Anyway, when I first started this exercise, I got 150 "hits." That climbed steadily before peaking at 634 on 11/13/2006 and dropping in December and early January. We've seen national inventory figures come down a bit as well, and I expect this week's existing home sales report for December to show the same thing -- an inventory decline. Many will no doubt cite these figures as "proof" that the housing inventory problem has been solved.

But I've said in several forums that something else entirely is at work: Seasonal influences. Many sellers who fail to sell during the peak spring and summer seasons pull their listings off the market late in the year. After all, they know buyers are few and far between during the holidays. Then these very same sellers re-list ahead of the spring season, starting in late January or February. You see the same pattern show up again and again, in both strong and weak years for real estate.

Lo and behold, I got around to checking inventory today and my search returned 643 hits. In other words, for-sale inventory just set a marginal new high. It's just one small corner of the national real estate market, of course. But I'd be willing to bet the same trend is showing up in other parts of the country. Look for the NATIONAL inventory stats to show an increase, beginning in either January or February. In fact, I wouldn't be surprised to see total existing home inventory rise to a new record by late spring.