The Morning Report
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Resale housing activity surged last month, with the number of home sales increasing by 25.0 percent between March and April. Volume was still lower than it had been a year prior, but less so than in previous months: the average year-over-year decline for January, February, and March of this year was 30.7 percent versus a year-over-year decline of 13.4 percent in April.

At the same time, resale inventory grew at a modest 1.7 percent pace for the month, ending up 10.9 percent higher than it was a year prior. Once again, while higher than last year this represents an improvement from the year-over-year comparisons in prior months.

The increased demand met with modest supply growth to substantially bring down the months-of-inventory figure. As pictured in the accompanying graph, the number of months of resale inventory has declined to levels not seen since the before the credit crisis abruptly deepened in mid-2007.

The big decline in the number of months’ worth of inventory waiting to be sold is certainly a positive development for the market. But there are a couple of footnotes. First, according to local broker Adam Rappoport of G&R Realty, it appears that the volume of closed sales has picked up much more in the areas that have suffered steep price declines than in those that haven’t. Adam believes that the prices in the hard-hit areas may finally have gotten low enough to start bringing buyers back into those particular markets even as activity has been flat or even decreased in some of the more price-resilient areas.

Second, the resale inventory numbers detailed here represent the totality both “want-to-sell” and “must-sell” inventory. I have long maintained that the latter category — which consists mostly of foreclosures but also includes vacant and builder-owned properties — is the more important one. And if the number of in-process foreclosures is any indication, the must-sell component of inventory is set to keep growing fast. It remains to be seen whether the increased demand will overpower all that must-sell supply that appears to be headed for the market.

— RICH TOSCANO

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