by Calculated Risk on 6/10/2007 05:52:00 PM

From U.S. News: The Spring of Home Sellers' Discontent

... inventories of unsold homes in major metro areas rose another 5 percent in May, according to Zip Realty, nearly a one-third increase over the same time last year. And while home builders have cut back on construction by about as much, "they still have a lot of money in the ground," Credit Suisse housing analyst Ivy Zelman says of the raw land still on builders' books. "And the only way to get their cash back is to build more houses."

If the NAR number follows Zip Realty for May, then the May existing home inventory levels will be over 4.4 million - another all time record - and total inventory, including new homes, will be approaching 5 million units.

UPDATE: Add graphs based on Zip estimate of inventory increase for May.

Click on graph for larger image.

This graph is based on the Zip Realty estimate of the inventory increase for existing homes in May. Inventory usually increases in May, but the levels of inventory (already an all time record) are a reason for concern.

A 5% increase would put inventory at 4.41 million. A word of caution: we have seen the Zip Realty estimate vary significantly from the NAR estimate in the past, probably because the Zip Realty numbers are only a subset of the total NAR numbers.

The second graph shows the impact on the "months of supply" using the Zip Realty estimate for inventory, and the NAR estimate for pending home sales (down 3%).

This would put months of supply at or above 9 months - very close to my estimate of the peak this summer of 9.5 months. Once again, this is just an estimate.

Original post continues:

Meanwhile the homebuilders keep building, because they can't sell the land.

[Land sales have] "just really slowed to a complete trickle with very few buyers of any type out there ... that's part of the reason why you do see many home builders resorting to selling spec homes because there's really a way of liquidating the land portfolio."
Homebuilder Hovanian, June 1, 2007

"it's probably going to take until next summer before things finally bottom out,"
Mark Zandi, chief economist at Moody's Economy.com, June 10, 2007