On today’s show we are looking at human behaviour to try and understand what is happening in the housing market.
It’s normal to associate a falling market with falling transactions, rising inventory, and falling prices.
According to the laws of supply and demand, when supply increases and demand falls you will see all three of these classic effects, falling transactions, rising inventory of homes for sale and falling prices
But a funny thing has happened on the way to the market.
In numerous markets all across North America we are seeing falling inventory. We saw inventory peak in October and November in many markets. Inventory in Nashville fell by 30% since the fall. Inventory has fallen by 20% in Charlotte NC.
There are plenty of new listings. But they are not sitting on the market. Inventory is still falling.
Is it possible that we are witnessing a seasonal effect? Does inventory fall during the first quarter in most years?
Well no, in fact, we usually see the opposite. Inventory often grows during the winter months.
Homes that are listing are not sitting on the market for months and months. They are moving.
So why is inventory falling? Does it mean that fewer people are moving?
There seems to be plenty of jobs activity. People are still moving for work. Layoffs are up, but the jobs market seems to be absorbing laid off workers at a reasonable rate.
I don’t have comprehensive data to back this up. I have a few localized examples. But it’s enough to form a thesis. The thesis is that people are not selling their homes unless they absolutely have to.
Many people locked in a good interest rate over the past five years. If they sell their home and buy a new one, they will rate lock at a new higher interest rate. They’re better off keeping their home and renting it out.
Host: Victor Menasce