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Boston housing inventory trends Apr 2007 - Mar 2016

 
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admin
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Joined: 14 Jul 2005
Posts: 1788
Location: Greater Boston

PostPosted: Fri Apr 29, 2016 7:21 pm GMT    Post subject: Boston housing inventory trends Apr 2007 - Mar 2016 Reply with quote

Currently, anemic inventory is one of the two main factors dominating the Boston real estate market, skewing it heavily toward sellers. (The other factor essential to sustaining current real prices is historically low mortgage rates.) Prospective buyers would benefit from knowing when inventory will improve. That may not be any more predictable than when mortgage rates will change, but perhaps a simpler question whose answer would also provide value is whether inventory is currently improving.

Answering whether inventory is currently improving is tractable, but the answer won't be obvious from the numbers typically reported. There is a high degree of seasonality to inventory availability, and so a decline in inventory this month compared to last month might actually be an improvement if the decline is less than normal. Comparing inventory for a given month to the same month a year earlier would be one way factor out seasonality, and that is sometimes done in news articles. However, that doesn't provide insight into what level of inventory is normal and is also susceptible to noise from the anomalies for a particular year, such as Boston's mini ice age at the beginning of 2015.

As an attempt at working out a way to better monitor inventory so that a change in the trend can be spotted more easily, I've converted Zillow's inventory data for the Boston MSA into a seasonally adjusted series. The conversion is simplistic, and if there are suggestions for improvements, please post them. For each month, I adjusted the raw inventory number by the percentage of inventory that the same month represented in all prior years. I extended the data series back beyond the beginning of Zillow's data by using the older Boston inventory data from The Department of Numbers. Below is a graph of the results from April 2007 - March 2016.



The graph above would suggest that inventory is terrible and continuing to worsen. Unlike in the past report where it appeared that inventory had at least stopped declining, the last several months saw a resumption of the decline.

One looming question this raises is: where is the inventory from baby boomers? Eventually, their exit will likely create a boom on the supply side as they retire, downsize, and move on. Previously, this was projected to begin in 2015 and to easily take two decades to play out, based on the crossover age beyond which selling has historically exceeded buying in Massachusetts. This is a major risk factor for current buyers because the inventory hasn't materialized yet, may not materialize soon enough to help buying in a practical sense, and yet when they want/need to resell their home, they could very well be competing with much higher inventory.

Past editions of this report include:

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optimus



Joined: 23 May 2008
Posts: 26

PostPosted: Sat Apr 30, 2016 4:07 pm GMT    Post subject: Reply with quote

I think in a normal housing market the problem of inventory would have corrected a long time ago by new supply being constructed. There is still suitable land in the city and in the suburbs to build. Yet it hasn't happened because something about this market is not normal.
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Richthofen



Joined: 02 Apr 2014
Posts: 68

PostPosted: Sat Apr 30, 2016 5:43 pm GMT    Post subject: Reply with quote

optimus wrote:
I think in a normal housing market the problem of inventory would have corrected a long time ago by new supply being constructed. There is still suitable land in the city and in the suburbs to build. Yet it hasn't happened because something about this market is not normal.


Yeah what's different is lots of homebuilders got burned or went out of business during the downturn. And the qualified pool of buyers is a lot smaller (but still larger than the inventory). Builders have been content to build multifamily developments for rentals and high end luxury buildings, both whose margins are very high and are a much safer play during a fake economic recovery like we're seeing.
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optimus



Joined: 23 May 2008
Posts: 26

PostPosted: Sat Apr 30, 2016 11:48 pm GMT    Post subject: Reply with quote

Richthofen wrote:
Yeah what's different is lots of homebuilders got burned or went out of business during the downturn. And the qualified pool of buyers is a lot smaller (but still larger than the inventory). Builders have been content to build multifamily developments for rentals and high end luxury buildings, both whose margins are very high and are a much safer play during a fake economic recovery like we're seeing.


If this is the case, shouldn't there be a huge surplus of apartments buildings and luxury condos? I know apartments are just as limited in supply based on the high rents.
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Former Arlingtonian



Joined: 23 Oct 2013
Posts: 141

PostPosted: Fri Oct 14, 2016 8:20 pm GMT    Post subject: When there are empty homes on the market Reply with quote

I don;t believe th inventory numbers.

1. Is is now common for people to find a home to buy that has no occupants - this is historically unusual.

Please correct me if I'm full of B/S. I remember looking for a home to buy in 1999 and we didn't come across a single unoccupied home that was on the market. Today staging of homes is now an industry because there are so many empty homes that are being prep for sale.
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