NC State’s Dr. Mike Walden – A Good Economic Number
One of the key parts of the economy is the housing market. Do any of the economic statistics related to the housing marketing look like they are headed in the right direction? N.C. State University economist Mike Walden responds.
“One that we really focus on is inventory, and this is important because the more houses out there for sale, the fewer buyers there are, that’s going to lead to lower prices. And that’s exactly what’s been happening over the last four years. And, again, a well-known number: The average house has gone down in value about 33 percent and negatively affected people’s wealth, et cetera.
“So inventories are very important, and we do have some good news here. The way we measure inventories in the housing market is the number of months it would take to sell the existing homes on the market at current sales rates. A normal number here is 6 months. Now we reached 13 months in the national housing market about 18 months ago — very, very high. The recent number just released by the National Association of Realtors has come in at 5.5 months — so obviously below that normal 6 months. So this is a great sign.
“Now, before we get too excited, some analysts think that this is artificially low because there were some lawsuits against big banks to stop foreclosures. Those lawsuits have been settled. So there’s some thought that foreclosures had been bottled up. And we may get a new burst of foreclosures, which will put that number up. But still most people are not expecting it to go up to where it was, and we do think we’re going in the right direction in terms of inventories.”