First, this is not a scientific post; there are no hard statistics, no graphs and no complex economic formulas. This is essentially a compilation of a lot of information that I have seen over the last few weeks from a variety of sources combined with my experience. Part of what I do is trade securities. As a trader, I look at certain intangible factors in the market that I cull from news sources. What the information below tells me, as a trader, is: 1.) A lot of people are looking to sell their houses right now. 2.) Industry insiders (people in the know) are selling their shares in home building stocks, 3.) Foreclosures are creeping up. Together, all these factors could be read as the beginning of a top in housing, or the beginning of a downtrend. At the very least, they indicate a certain exhaustion of the market.
"Dumping" is a trading term that simply means everybody that owns a particular asset starts to sell as much of that asset in a very short period of time. As the anecdotal evidence below indicates, inventory (or assets available for sale), appears to be spiking in a number of areas.
This is from Daily News Transcript in Boston:
Bigger communities, such as Framingham and Newton, also have reacted to the changing market, with the median asking price up just 4 percent in Framingham. In Newton, the median asking price rose just 3 percent, from $889,000 to $920,000 from year to year. Both communities have seen a 33 percent increase in the number of single-family homes on the market.
Similarly in Sudbury, where prices have been rising steadily in the last few years, the median asking price rose 7 percent while inventory has risen 21 percent, from 79 properties a year ago at this time to 100 now. The median asking price a year ago was $834,900; today it's $899,900.
But even in relatively small Holliston, a 40 percent increase in inventory has convinced sellers to look hard at their pricing. The median asking price has increased just $900 in the course of the year. Similarly in Hopkinton, where inventory has jumped 28 percent, from 66 single-family homes to 92, the median asking price has declined 4 percent.
In Wayland, another popular community with fast-rising prices, a 23 percent increase in inventory - 91 single-family homes on the market now compared to 70 a year ago - has resulted in a 15 percent decline in the median asking price, from $799,900 a year ago to $679,000.
Not in Wellesley, however, another community where median asking and selling prices are usually higher than $1 million. While inventory there has increased by 31 percent, with just two listings under $500,000, the median asking price rose 16 percent. It's now at $1.495 million.
This is from the Sacramento Bee
In July, the monthly inventory of resale homes for sale in Sacramento, Placer, El Dorado and Yolo counties combined shot up to 7,263 - the highest for any month since September 1998. As of Thursday morning, the inventory had risen another 26 percent to 9,141 homes, reports TrendGraphix, a local data firm affiliated with Lyon Real Estate of Sacramento.
"The inventory is ramping up and we're now seeing a changing market - the bell has tolled," said Michael Lyon, head of TrendGraphix and Lyon Real Estate.
This is from the Daily Press in Virginia
There were 4,843 homes on the Northern Virginia market - defined as Fairfax, Arlington and Alexandria - at the end of July, a 26 percent increase over the 3,836 homes on the market at the same time last year, according to the Realtors association.
This is from North County Times in San Diego
Inventory of all existing homes for sale in San Diego County reached a 10-year ebb of 2,916 units on March 29, 2004, said Dennis Smith, an Encinitas-based Realtor who has been tracking prices and inventory since 1995. As of Aug. 10, that inventory had risen to 13,204 homes. That rise [an increase of 352%] took place in nearly 18 months.
Foreclosures haven't really been a story yet. However, it appears foreclosures are increasing.
Foreclosures are increasing:
According to data released today by online foreclosure listing service, Foreclosure.com, a total of 90,590 foreclosed residential properties were available for sale in the U.S. during July. A baseline comparison of foreclosure inventory in July compared to June shows a 4.6 percent increase in the total number of foreclosed residential properties for sale in July, and an 8 percent increase in new foreclosure
listings during the month.
Foreclosure inventory is up nearly 10 percent compared to July 2004 - an uncharacteristic upward trend throughout the summer months," said Brad Geisen, president and CEO, Foreclosure.com. "More significantly, we are seeing an increase in foreclosures in a majority of states. These blanket increases may indicate that factors such as weakening sustainable home ownership and the volatility of the housing market are beginning to add to the geographic economic factors that contribute to foreclosures."
Insiders (high-level management) at housing company stocks are selling shares. Toll Brothers insiders sold over 10,900,000 shares starting in mid-June. Insiders at KB homes have sold over 2.5 million shares over the same time period. And overall the homebuilder's stocks have dropped in the last month. Toll Brothers (TOL) -17%, DR Horton (DHI) -17%, Lennar (LEN) -13%, KB Home (KBH) -15%, Centex (CTX) -16%, Ryland Homes (RYL) -13%. These corrections in housing stocks could be explained as mere technical corrections - nothing increasing forever in price without some profit taking along the way. All the stocks mentioned went through a similar price correction in March and April of this year. However, insiders at two of the largest market cap companies weren't selling shares during that correction.
I want to caution; this is based on anecdotal information. However, there are few formal definitional guidelines for a bubble in any asset; essentially, it comes down to an "I know it when I see it" type of definition. It does appear that people involved in the real estate industry are looking to get out, which is an indication that insiders think the market is topping and they want to get out when the getting is good.