by Calculated Risk on 8/08/2005 01:12:00 PM

My guess is this will be the theme for the month of August: Housing inventory spikes in 'burbs.

Inventory of single-family houses is piling up in Greater Boston in a sure sign the residential real estate market is slowing.

Buyers are taking advantage of the increased inventory, waiting longer before they make their offers and hitting more open houses. Sellers, meanwhile, many of whom are trying to cash out near the height of the market, are growing increasingly frustrated as their houses sit on the market for weeks and months.

First, there is a seasonal component to inventories - they usually rise in August. So its important to do a YoY comparison.

The number of listings of single-family houses in 17 towns in Greater Boston was up 25 percent or more last week compared with one year ago. And those houses are taking longer to sell. In four towns, listings increased 50 percent or more.

Second, some see this simply as a return to normal market conditions:

The slowdown is not a bubble bursting, and in many cases is merely a return to more traditional market conditions, after months of record-breaking sales volume and prices.

Others are less sanguine:

The "huge amount of inventory" is bringing prices down in Milton and Quincy, said Betsy Trethewey of Re/Max Landmark in Milton. Sellers are not acknowledging the changing dynamic, though, she said.

Price reductions from $20,000 to $60,000 are not unusual, she said. Sellers are frustrated, and some are angry, she said. "They've been very spoiled for the past few years. They're not accepting the truth of what is actually happening," Trethewey said.

Sellers traditionally are slower to realize when the market is changing, usually because their information is more dated than buyers'.

Or maybe the housing story will be the spreading of the bubble. There are bubble concerns in Fort Collins, Colorado housing and Sioux Fall, South Dakota farm land.

Fort Collins might have a housing market not only as overheated as Denver but also nearly as overpriced as San Francisco, Atlanta and San Diego.

A shift in the types of mortgages being used in Fort Collins may indicate the city is facing a steep housing market with buyers struggling to find a way to afford homes, according to recent statistics.

Of Fort Collins' April purchase loans, 42 percent were interest-only mortgages, in addition to 33 percent of refinances, according to LoanPerformance, a San Francisco real estate information service.

Or maybe the story will be rising foreclosures:

"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."

I think the August story will be rising inventories, followed later by fewer transaction. The foreclosure story is probably for next year.