Pending Sales Up, Inventory Down, Better Days Ahead?

Data released by the Minneapolis Association Area of REALTORS (MAAR) indicates that a number of important housing statistics appear to be improving.  Some 5+ years removed from the beginning of the housing bubble, and 3 years removed from the worse financial crisis since the Great Depression, we are finally beginning to see some news that their is life in the market.

The data shows that, across all price ranges, there has been an 18% drop in inventory compared to one year ago.  Homes priced between $120,000 and $200,000 saw the largest decrease in inventory, down roughly 25% from last year.  This is particularly important to sellers with equity in their homes, as well as home buyers making their first home purchase.  Lower inventory puts more pressure on buyers to act quickly and with stronger offers, which over time should lead to some price gains.

The other encouraging bit of information came in the way of pending sales.  According to MAAR, pending sales are up roughly 43% compared to a year ago.  Higher pending sales has a similar effect to lower inventory - greater demand for the same (or fewer) number of houses leads to fewer days on market, stronger offers, and (over time) price gains.

In the grand scheme of things, we are still far from seeing the recovery that is needed.  Housing prices are still soft, and more than 30% of all new inventory is either a lender-owned or lender-mediated sale.  Overall, housing prices are still down roughly 33% compared to their highs in 2005 and 2006.  We still have a ways to go, but it's definitely encouraging to see some positive movement as we swing slowly towards a more balanced market. 

To Help or Not to Help?

Via the opinion section of the New York Times:

Tens of millions of Americans are being crushed by the overhang of mortgage debt. And Congress and the White House have yet to figure out that the economy will not recover until housing recovers — and that won’t happen without a robust effort to curb foreclosures by modifying troubled mortgage loans.

There is little doubt that the housing bubble, followed by the housing bust, has left millions of Americans with huge debt on an asset that will never be worth what they paid for it.  As homeowners scrimp every last dollar to pay their mortgage, less money is spent in other areas that boost the economy, such as personal investing or consumer spending.

But I think this situation gets to the heart of the larger debate we are having in this country about the role the government should play during economic recessions.  A stronger effort to reduce mortgage principle balances would undoubtedly give the economy a jolt, but some view any intervention by the government as a distortion in the market and an unscrupulous use of taxpayer dollars.  Others argue that the "free market" got us into this situation, and that we are letting our fellow citizens and the larger economy down by refusing to address the root of our economic woes.