Dave Stark [480K PDF]:

So far, 2007 seems to be unfolding pretty much to form. In our last newsletter (4th Quarter 2006), we predicted that closings reported in the first quarter of 2007 would run slightly behind closings for the first quarter of 2006. As of mid April 2007, sales reported to the South Central Wisconsin MLS for the first quarter trail last year by 8%. This probably overstates the drop, since stragglers will continue to report closings for the next few months. It wouldn’t surprise us if another 100 or so sales will be on the books when we look back next year. Nonetheless, there are a number of very positive, and underreported, trends at work behind those numbers that bear analyzing.
Inventories: In the chart below, you see that inventories have risen slightly from the same period a year ago, although not nearly as much as they did the year before that. However, if you compare both inventories and the pace of sales to 3 months ago, you’ll see that the number of days of inventory on the market have actually fallen for both single family homes and condos (see chart, p.2). Condo inventory on the MLS hasn’t grown at all since the 4th quarter, although it remains stubbornly high. Building permits are down even further this year than they were last year, which will continue to hasten the fall in inventories.
New Construction vs. Resale Housing:For all of 2006, single family sales fell 7.8% for the entire South Central Wisconsin market, and 11.1% for Dane County. However, if you break those sales up into new and used, you see a different picture. Single family resales were down only 5.5% for the entire market, and 6.2% in Dane County. New construction, by contrast, was down 20.1% for the entire market, and 27.2% for Dane County. For the first quarter of 2007, resales are down only 1.4% for the entire market, and are actually up 1.5% in Dane County. New construction sales, however, were down 30% in Dane County for the first quarter of 2007 compared to a year ago.
There is always a 30 to 60 day lag between offers and closings, so the numbers you’re seeing for the first quarter reflect activity from the holidays and January/February, always the slowest time of the year for offers. So far, offers have tracked pretty closely with a year ago, which is good news, because the first half of last year wasn’t that bad. If we have a “normal” second half of 2007, we should have a much better year than last.

The report includes a useful look at Sub-Prime Lending. Dave Stark is a friend and long time customer.