The Morning Report
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The latest round of mortgage tightening impacted more than just the home price indicators; it had a noticable effect on sales volume as well. September resale activity declined 27 percent from August and was down 26 percent from twelve months prior.

Overall resale inventory grew slightly from August, but ended up less than 2 percent higher than its level from a year ago.

Over the past year, the supply and the demand situation has deteriorated a lot more for single family homes than it has for condos. Condo inventory was actually down 8 percent from last September, while single family inventory was up 8 percent. Similarly, September condo sales were down 16 percent from a year ago whereas single family home sale were down 32 percent over the same period.

However, it’s not the case that condos have fared better than single family homes since the market peaked. It’s just that the condo market had already deteriorated far worse than the single family market by last September. Single family homes have recently been catching up, and the recent mortgage tightening for more creditworthy borrowers has sped that process along.

The steep decline in sales resulted in a substantial increase in months of inventory, an indicator that measures how long it would take a given month’s listed entire inventory to be purchased at that month’s pace of sales. The accompanying graph, which shows how many months worth of resale inventory was listed for sale through 2006 (green line) and 2007 (yellow line), shows that this indicator dramatically worsened last month. There is now almost 12 months worth of resale inventory sitting on the market, compared to less than 9 months of inventory last year. Additionally, far more of this year’s inventory is of the must-sell variety.

If these indicators provide clues as to future price movements — and I believe they do — then it seems likely that price declines in the fourth quarter of 2007 will be worse than those of late 2006.

— RICH TOSCANO

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