A clear turn in housing as economic conditions improve

In my City Talk column last Sunday, I wrote about the declining inventory in the Savannah metro area housing market. We’re still a long way from where we need to be, but the twin trends of fewer new listings and increased sales have steadily whittled the inventory lower and lower, which has helped put a floor under prices.

With a clear floor under prices, investors and first-time buyers are more likely to make purchases, while sellers likely become less panicky.

Our inventory of 8+ months is higher than the inventory nationally and far higher than the optimal level of about 5 months, but at least we’re headed in the right direction.

The national trends are fairly positive too, in terms of both existing home sales and inventory.

Today the National Association of Realtors announced that existing home sales in August were at a seasonally adjusted annual rate of 4.82 million and that the inventory fell to 6.1 months of supply.

Here are two graphs from Calculated Risk’s great roundup of the data:

Note that existing home sales are around the level that we’d consider normal, and note that inventories are approaching their pre-bubble trends.

The Armstrong Atlantic State University Coastal Empire Economic Monitor (published by the Center for Regional Analysis directed by Michael Toma) shows improving economic conditions generally in the 2nd quarter of 2012, although the level of activity measured by the coincident index is still well off from the pre-recession peak.

A key graph from the latest Economic Monitor shows that initial claims for unemployment are still very high compared to long-term historical trends, but are steadily declining as the local labor market slowly heals:

I don’t want to put too happy a face on all this. We still have a long way to go to achieve a full economic recovery and it’s always possible that some activity — especially in housing — could be worse than expected over the winter.

But there’s lots of room for optimism both locally and nationally that conditions will continue to improve, if far more slowly than many would hope.