by Calculated Risk on 8/21/2009 04:00:00 PM

NEW Problem Bank List (Unofficial) Aug 21, 2009

Note: Market Graph at bottom ...

NOTE: the months line up with the lines on the following two graphs - sorry if that was confusing.

Click on graph for larger image in new window.

Here is another graph of inventory. This graph shows inventory since 2002 by year.

The dotted lines (2002 - 2004) are for the boom years. 2005 (dashed green) is the transition year at the end of the boom. And the solid colors are for the bust years.

The second graph shows months of supply for the same years.

Although inventory and months of supply are lower than in 2007 and 2008, the levels are still very high.

It is important to watch inventory levels very carefully. If you look at the 2005 inventory data, instead of staying flat for most of the year (like the previous bubble years), inventory continued to increase all year. That was one of the key signs that led me to call the top in the housing market!

Note: there is probably a substantial shadow inventory – foreclosures coming as shown by the MBA delinquency survey yesterday, and homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. There are also reports of REOs being held off the market, so inventory is probably under reported.

The third graph shows the year-over-year change in existing home inventory.

My guess is prices will probably continue to fall until the months of supply reaches more normal levels (closer to 6 months compared to the current 9.4 months), and that will take some time.

However this general trend of declining year-over-year inventory levels is a positive for the housing market (while remembering the shadow inventory).


Here is the market graph from Doug Short, Doug Short matching up the market bottoms for four crashes (with an interim bottom for the Great Depression).

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.