While there are some storm clouds on the horizon right now for the stock market — lackluster GDP, a recent spate of weak manufacturing data, concerns about a China slowdown — one sector of the economy continues to move higher.
The recent trend has been a steadily decreasing supply … and steadily rising prices as a result. And while there is admittedly a risk that we have bid up houses too fast too soon or that the end of low interest rates could squash this rally, there appears to be no end in sight for the short term.
Consider this May “state of the market” report from real estate analysis firm Movoto. The experts there write:
“According to our analysis, 32 of the 38 cities we track saw a decrease in inventory on a year-over-year basis, while 30 of the 38 cities saw an increase in median list price per square foot on a year-over-year basis.”
Obviously, real estate is all local and there are sure to be bright spots and dark spots depending on where you look. But the trend is worth noting.
Movoto goes on to say that the “combination indicates a seller’s market, as fewer homes on the market increases home buyer competition and helps drive up listing prices” and that “our assumption is that current homeowners and investors are waiting for home prices to increase before they attempt to sell — to the detriment of first-time home buyers.”
In short, it’s a good time to be selling your house and a horrible time to be looking.
Here are the two major factors Movoto looked at that tell the story best:
Click to EnlargeMedian List Price Per Square Foot: The median list price per square foot across the cities Movoto tracks was up on both a year-over-year basis and a month-over-month basis. It was also the highest mark since 2010. Sacramento, for instance, saw a dramatic increase of 37.9% over last year.
Click to EnlargeInventory Levels: As noted, 32 out of 38 cities tracked by Movoto (or 84%) saw inventories decline. This was most dramatic drop was Oakland, which saw its inventory drop 79.3% across the last year. The details are even more indicative of the dearth of options. Consider that in 2012 there were 720 homes on the market in Oakland and a mere 149 now. For a major metro area, that’s insanely low.
Obviously a dip back into recession could weigh on prospective homebuyers, and a rise in interest rates could choke off demand by ratcheting up borrowing costs. But it’s hard to argue against this trend right now based on the May outlook from Movoto.
- Check out the full “May 2013 State of the Market” report here on their website. (Movoto.com)
- For balance, there are some worried that this is the beginning of a new housing bubble. (Town Hall)
- In contrast to housing, here are five sectors that have been smashed in 2013.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.