What is going on with inventory and prices?

The Wall StreetJournal   is on the bandwagon about rising prices. More “Happy Days are Here Again” playing in the background. 

The number of homes listed for sale at the end of 2012 stood at the lowest level in more than five years, a development that helps explain why home prices have rebounded so strongly over the past year.

I had some fun with these interactive graphs http://blogs.wsj.com/developments/2013/01/16/housing-inventory-ends-year-down-17/tab/interactive/ today. Because they are working with median price averages for the whole area, and not my particular towns and cities, they are not as meaningful as local market information would be. 

I added Boston into the first tab “most expensive.” (You can do that by clicking on the list below.) I am happy that we didn’t make the list of the most expensive markets in America. Orange County, San Diego, Washington and New York hold those top spots. 

Here in the Boston area, the median price changed from $333,000 in May 2011 to $345,000 in May 2012. That is a price rise that matters. If you look at the Boston line, you will see that prices were flat in the Spring of 2011, and rose sharply in the Spring of 2012. That is the difference that my clients felt last year. When the market is flat, buyers don’t have as much pressure to buy now, or suffer higher prices later.

The more telling chart is the inventory chart to the right. Boston has its normal seasonal inventory curve. That humped shape is typical of a large increase in listings in the spring and the lowest ebb in the winter. (New York has one, too.) What we really felt last year was the depression of the seasonal hump. In 2011, there were roughly 31,000 properties for sale at peak, whereas in 2012, there were roughly 25,000. Boston’s inventory shortage is more dramatic than the highest-priced markets in America. Look at the chart below the graph. You will see only a few other places that have inventory declines in the teens, like our decline of 15.8%. Our prices are not suffering a staggering increase. This is the good news for buyers.

My advice for buyers is to keep their eye on the value of any particular property you might like to purchase. Ignore the hype that is all over the newspapers. Considering how steep our inventory shortage is, we still have a pretty stable market. Poke around on these charts for yourself.