California Inventory Jumps from 3.8 Months to 5.8 Months in January – Total California Housing Inventory 154,000 Homes. How Many Homes are in Mortgage Limbo and Don’t Show up in These Stats? If we take Distress Data About 793,000 Homes.

Rarely do we ever see an actual total inventory report for California because this would require a count of each county in the entire state.  I try to track all this data in a spreadsheet since obviously the most important item we have in measuring California real estate is the actual quantity of homes we have for sale on the market.  Last month, the amount of unsold inventory jumped from 3.8 to 5.8 months in January.  Part of this was because of the seasonal dip in home sales for December but also the elevated amount of homes for sale on the market.  Keep in mind that in the past the unsold inventory number would usually track down in the month as well as people would hold off on selling their homes.  Yet in this climate where a large number of home sales are distress properties, they are not pulled back during this typical seasonal fluctuation.

California still has many deep issues including a large amount of troubled loans in option ARMs and other mortgage products that have extremely high default rats.  Let us first look at the latest snapshot from the California Association of Realtors:

Aside from the seasonal fluctuation, the seasonal home sale rate has fallen by 10 percent from this time last year.  This can be from an exhaustion of home purchases and all the additional government programs set in place to spur home buying.  The median home price has been pushed up from this point last year but has fallen from last month.  The amount of unsold inventory did move up again last month.  Let us first crunch that number since this is such an important point in determining how many homes are for sale in California:

Source:  MLS

In total, California has over 154,000 homes listed on the MLS.  Yet this number in itself doesn’t tell us the actual amount of inventory on the market.  We then need to look at the number of homes sold statewide last month:

January 2010 CA Home Sales:                     27,858

After getting this number we merely divide by the amount of total inventory:

154,717 / 27,858 = 5.5 months

This number is fairly close to the 5.8 months reported by the CAR.  In a healthy housing market anything below 6 months of inventory is a good number.  Yet this market is anything but healthy.  In fact, we really need to get a better understanding of the market regarding negative home equity but also, how many homes are in distress that aren’t listed on the MLS.

A study from Arizona State University examines negative equity from MSAs (metropolitan statistical areas) and finds that the bulk of them are here in California:

Source:  ASU

Now this chart is crucial in determining the path ahead because it gives us a sense of how many more distressed properties we can expect in the year to come.  If we look at Merced California, 85 percent of mortgage holders are underwater.  Couple this with an unemployment rate of 17 percent and you can understand why some areas are going to see low home prices for a long period ahead.  And the study from ASU and other institutions shows that negative equity is the number one factor in predicting future foreclosure.  This makes sense.  If you are in trouble and have equity, all you need to do is sell.  But when you are in a position where you owe more than your home is worth, selling isn’t an option unless the bank approves a short sale and this seems to be a new path ahead.  How big of an impact this will have is yet to be seen.

So how many homes are in distress in California?  This is hard to say.  Yet even if we take nationwide statistics and apply them to the state, we know that the number of homes in trouble is extremely large:

“(Calculted Risk / MBA) The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.58 percent, an increase of 11 basis points from the third quarter of 2009 and 128 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 15.02 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.”

Now this is nationwide data.  So let us apply this number to the amount of California mortgages (the distress rate in California is much higher because of loans like option ARMs):

California

Housing Units with a mortgage:                 5,290,276

MBA Nationwide data on 1 payment behind and foreclosure (15%)

Total potential pool of current distress California homes:            793,541

Now take that above number and compare it to the 154,000 homes currently listed on the MLS.  In other words, the potential for distress inventory hitting the market for years to come is enormous.  It already appears that banks won’t flood the market but with this amount of people 1 payment behind or in foreclosure, California housing will be depressed for years to come.

If you enjoyed this post click here to subscribe to a complete ad free feed.

Popularity: 7% [?]

Related posts:

1. California Housing Inventory – 3.8 Months of Inventory if we only look at Public Data. The Financial Math behind California Home Prices and Artificially Low Inventory. Distress Inventory Still Dominating Market. For a state like California getting an accurate figure on...
2. How Much California Inventory? 3.9 Months from Public Data. A drop from 6 Months at the Start of the year and down from 16 Months Reached in Early 2008. Yet Distress Properties are still a Big Part of the Market. According to recent data from the California Association of Realtors,...
3. California Housing Inventory Mystery: 206,000 Homes on MLS but is the Real Inventory 412,000 or closer to 618,000? It is probably one of the least desirable tasks to...
4. San Francisco Shadow Inventory Larger than Regular MLS Data: How the Real Housing Inventory is Hidden from the Public. Once upon a time in California, housing prices aligned with...
5. California Housing Still Over Priced: Examining Case Shiller Data and Seasonal Distortions. The Impact of Shadow Inventory on Price. One simple rule that every student of introductory economics understands...

Related posts brought to you by Yet Another Related Posts Plugin.