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Housing sales volume has been improving of late, as I noted last week. But now that foreclosure activity has bounced back after a temporary lull that resulted from a change to state law, the number of existing homes going into foreclosure each month is once again higher than the number being sold. That was the case in December, anyway, when DataQuick recorded 3,004 existing house and condo sales compared to the 3,315 mortgage default notices recorded by the county. Default notices dropped to 3,055 in January, but while the January DataQuick numbers aren’t out yet, other data indicates that sales will also be lower than they were in December.

Here’s an update of a chart we’ve looked at from time to time as the housing bust has progressed. The orange line on the graph divides the number of single family home sales in a given month by the number of mortgage defaults that same month. The idea is to get a rough idea of how demand stacks up against potential “must-sell” supply. (Condos are excluded from the chart simply because I could only get my hands on historical sales data for single family homes, so the trend changes in this ratio are more important than the absolute number.)

The chart shows that after the brief respite in foreclosure activity, the sales-per-default ratio is once lower than at any time during the region’s early-1990s housing downturn.

It’s kind of hard to make comparisons over that long time scale, so this next chart lines up the sales-per-default ratios for the early 1990s bust and the current bust, starting each series at the respective peak for home prices.

While the 1990s downturn saw the ratio bounce between 1 and 2 for the bulk of the time, the current sales-per-default ratio is under .6 after having gotten as low as .3 in early 2008. So we’re off the lows, but still in territory that was uncharted before the current bust.

The first graph above shows that home prices didn’t start sustainably rising at the end of the 1990s downturn until the sales-per-default ratio began to climb back toward pre-bust levels. If this pattern holds, we will need to see a huge improvement in the current sales-per-default figures before the market can make a real recovery.

— RICH TOSCANO

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