Housing Prices Improve in May, But Rising Inventory Looms

The prices of properties listed for-sale actually increased in 15 of 26 major markets during May, providing the latest evidence yet of some surprising bounce yet in the step of key housing markets nationwide. Price increases greater than one percent were even observed in eleven of 26 major housing markets nationwide, according to a report released Monday afternoon real estate research and analysis firms Altos Research and Real IQ.

The May trend continues surprising asking-price strength in core housing markets during recent months: in April, for example, asking prices only fell in seven of the 26 markets tracked by the index. A ten city composite price index found a decline of just 0.3 percent in May, as a result.

That’s not to say all is well in the nation’s housing market, of course. Asking prices fell at the fastest rate in Las Vegas, for example — down 3.7 percent during May and 6.5 percent over the most recent three-month period, according to the report.

But pockets of strength are clearly emerging in some housing markets: listing prices rose at the fastest rate in Denver, jumping 3.7 percent in May. Dallas, as well, saw prices rise 2.2 percent last month, Altos and Real IQ said.

“The weakest markets continue to be concentrated in Florida, California, Arizona and Nevada which all experienced the biggest price increases during the boom times,” said Michael Simonsen, CEO and co-founder of Altos Research. “Now these same markets are outpacing others on the downside as foreclosures and price declines continue relentlessly.

“We’re seeing some stability in many markets outside of these hard-hit states.”

The message of regional instability is one that echoes data released last week by the Mortgage Bankers Association, which found that while foreclosure activity had reached an all-time high in the first quarter, much of that activity was centered in so-called “bubble states” — California, Florida — as well as states with chronically bad economies, such as Michigan.

Inventory still rising
Seller optimism on pricing, however, isn’t yet beginning to match inventory trends — a sign that could portend future listing-price declines in future months.

Listed property inventories increased substantially, the report found, with the ten cities comprising the composite pricing index registering an increase of 7.9 percent during the first quarter, and 3.7 percent in May alone. Inventory rose in 25 of 26 markets — with the Miami market being the only exception. Inventory actually declined 1.3 percent in Miami during May, the firms reported.

“Continued growth in inventory across virtually all markets will restrain near-term price increases,” said Stephen Bedikian, partner and research director for Real IQ. “Markets like Denver and Dallas are showing strength because they did not experience high price inflation during the boom and recently only inventory growth has been limited.

“Affordability and limited inventory are the keys to a healthy market.”

For more information, visit http://www.altosresearch.com and http://www.realiq.com.