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Three Cents Worth: The Kitchen (Sales and Listings) Sync

[This week, real estate appraiser, Curbed graph guru, blogger, and podcaster Jonathan Miller is still seeking normal.]

Coming off of last week's listing theme and my near obsession with figuring out what is normal these days, I thought I'd compare listing and rental trends over an extended period of time. My in-house rental listing data only goes back to 2002 so I began both series with 2003 to get the year-over-year trend.

The "before and after" credit crunch pattern really jumps out from the chart. The period from the summer of 2007 through the fall of 2008 (blue area) marked the transition from zero credit standards to irrational credit standards for mortgage lending.

Before the credit crunch transition [polar opposites]: Rental (maroon line) and sales (green line) inventory moved in opposite directions and this has been likely a long term pattern beyond the recent decade. I've long observed the rental market leading the sales market likely because it tends to be more immediately reactive to changes in unemployment levels. Until the past decade, "getting a mortgage" was more of a "constant" in the home buying mortgage equation than a "wild card."
After the credit crunch transition [synchronized]: The rental and sales listing trends have remained in sync for the most part since the credit crunch began in earnest with Lehman. We are seeing rental listing inventory rise in response to rising rents. The sharp jump in inventory is more of a reflection of tenants moving to other rentals (musical chairs) in response to rising costs than the introduction of large amounts of new supply entering the market. For the past 2 years, sales inventory has remained stable and relative to sales levels, it has tightened.

What does this mean? I'm not exactly sure but I'd rather see rental inventory and sales inventory compliment each other rather than compete with each other. We are in the middle of a "rent versus buy" gray area with more and more considering a purchase. Normal patterns for the rental market are probably as far away as the return to reasonable mortgage lending standards.

I don't think we should expect a cooling of the rental market anytime soon unless the credit picture changes dramatically.
· Matrix [matrix.millersamuel.com]
· Three Cents Worth archive [Curbed]