Dispatches from the Front Lines of the Real Estate Wars (2)

I have mentioned my misgivings with the Case-Shiller 20 City Real Estate Index before, but everyone now hangs on it monthly and I have had to get on board too.

I have also mentioned that I am a real estate agent in New Jersey with access to the MLS data here, and a keen follower of the trends in local markets.

Case-Shiller was reported on Tuesday this week for the latest month (May). The news was all positive, confirming a four-month improving trend. The index rose one-half of one percent from the April reading, the first rise since 2006. Prices were higher in 13 of the 20 cities surveyed. The year-on-year statistic was 17.1% lower, but that is the first reading better than -18% in several months.

I don't believe anyone wants to forecast a big uptick in prices -- a V-shaped recovery -- but a lot of people are making the bold call that the residential market is at a bottom. For anyone who may have caught the bottom, congratulations! You know the hardest thing to do is to time a market bottom so precisely.

Lately I notice a lot more inventory "under contract". The Case-Shiller data sent me to the MLS to do my usual selling rate to inventory analysis and find out whether macro data confirm anecdotal experience. Do they ever. What I found is that the months of inventory in the local markets I follow has absolutely crashed. In the spring, we were at 10-11 months to clear the active standing inventory. Currently it is more like 5-7 months. Five month's inventory is comparable to the sellers market of a few years back. Wow!

Is there any reason to think the more active market is a blip rather than a trend? I can think of two. One is the action of the $8000 first time home buyer credit, which expires at the end of November and will not be extended. If you want to capture this, you're running out if time. The other is the regular action of the calendar -- every year sales pick up in the spring and close in the summer so that children can be situated in their new school districts for autumn. So let's keep an eye on this to see whether it has legs or causes disappointment later on.