August Housing Supply and Demand

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The number of resale homes sold in August was up 9.0 percent from a year prior. Inventory was down over the same period by 11.2 percent.

Putting supply and demand together, there were 6.9 months' worth of inventory for sale in August -- substantially better than August 2007's 8.4 months and just about the same as the August 2006 figure.

The 6-7 months' worth of inventory we've been seeing lately would in normal times be the hallmark of a reasonably healthy, if not exactly fast-paced, market.

But these are not normal times, as the following graph of foreclosure activity indicates:

More existing homes are entering foreclosure each month (the blue line) than are being sold. That situation is unprecedented, as far as I can tell, and it's clearly not a positive. So while the first graph would indicate that supply and demand are getting back into balance, the ever-fuller pipeline of potential must-sell inventory depicted in the second graph shows that things are more out of whack than they seem.

-- RICH TOSCANO