The U.S. housing recovery reached “two significant milestones,” according to Capital Economics’ Ed Stansfield.First, both CoreLogic and Case Shiller showed a double digit increase in home prices in March.
Second, the number of homes listed for sale climbed to 6.3 million in April.
“If we exclude November 2009, when homebuyer tax credits were distorting the market, the 6m mark was last breached back in 2007,” writes Stansfield. The reason the 6.3 million figure is significant is because it compares with annualized home sales of 5.4 million.
What this basically means is that in the near-term, sheer momentum will help boost home prices. But prices should moderate this year because supply exceeds sales. This latter point cools concerns about a new housing bubble:
“To put that into context, if the current listings/sales differential was to be sustained, end-month inventory levels would return to their long-run average level of just under 2.6m homes in the first quarter of next year. That would mean that the months’ of unsold homes measure, a useful indicator of the short-term supply and demand balance, and thus price pressures, would rise from 4.9 to 5.7.
In turn, that implies that the pace of house price gains would ease notably over the remainder of this year, dampening fears that the US housing market is again entering bubble territory.”
Here’s a longer term look at housing supply and demand.