Wednesday, 8th of July 2009 at 01:23:37 PMI was doing some Market Analysis in the ARMLS (that’s the Phoenix Valley MLS in case you were wondering). Something very interesting caught my attention. I’ve copied the data from the first six months into this post so you can see the same data that I do.
| New Listings | Active Listings | Sold Listings | Months Inventory | |
|---|---|---|---|---|
| Jun/2009 | 12,493 | 39,566 | 9,350 | 4.23 |
| May/2009 | 10,946 | 42,386 | 9,231 | 4.59 |
| Apr/2009 | 11,176 | 47,462 | 8,503 | 5.58 |
| Mar/2009 | 14,322 | 52,025 | 7,578 | 6.87 |
| Feb/2009 | 12,726 | 53,512 | 5,423 | 9.87 |
| Jan/2009 | 13,813 | 55,374 | 4,686 | 11.82 |
First, let’s define markets, a Buyer’s Market is one where Months of Inventory is 7 or more months, a Balanced Market is 5 to 7 months of inventory and finally a Seller’s Market is less than 5 months (according to website Real Estate Webmasters). Months of Inventory is defined as the Active Listings divided by Sold Listings, this is the rate of absorption, or the number of months it would take to complete deplete the available homes.
Now back to the chart, you can see that January and February were Buyer’s Market, a time when Buyer’s had really good choices and could make some good deals. March and April were in a Balanced Market, a situation where neither the buyers nor the sellers are really in a stronger position than the other side. And the last two months, well we’re looking at a Seller’s Market. I know that sounds a bit odd right now and this is only one indicator and the trend is showing that the inventory is getting absorbed.
This is good news in the sense we should start to see home prices/values starting to move upward as well as selection gets to be smaller. I thought this was very interesting and wanted to share with you.
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Relying on ARMLS data to forecast can be decieving. It really depends on the price point you are dealing in when determining a “Buyers” or “Sellers” market. For example:
below $25k – .6 mo of inventory (sellers)
$25-$50k – 1 mo (sellers)
$50-$75 – 1.6 mo (sellers)
$75-$100k – 2.1 (sellers)
$100-$125 – 2.3 (sellers)
$125-150 – 2.9 (sellers)
$150-$175 – 3.2 (sellers)
$200-$225 – 3.7 (sellers)
And so and so on…info gathered from cromfordreport.com
The $400k and above price point is a “Buyers” market w/ 6+ months of inventory. info from cromfordreport.com
Hi Billy thanks for posting comments and pointing out that price is important in determining market. Yes, I’m speaking in very general and very broad terms, you and I both know that it’s also depends on what part of the area we’re talking about as well, Maricopa, AZ is predominantly a buyers market where Scottsdale tends to be more sellers (speaking very generally), price, location, condition, desire are all factors when talking about market conditions. The Cromford Reports are excellent and I’ve been a supporter of the agreement between ARMLS and Cromford from the beginning, but do remember the Cromford report is based on the ARMLS data as well; they just do an excellent job of aggregating, churning and keeping historical data. I also suspect that he does some pretty good modeling for himself.
In my opinion, the main reason the $400k+ price point remains a Buyers market is mostly due to the difficulty of obtaining non-conforming loan and those that have the money don’t want to put large amounts of money down in a shaky market.
I posted this info was because everyone’s mind set is it’s a buyers market, it’s a buyers market, it’s a buyers market and I don’t want anyone to be caught off guard when I say it’s not always the case. This recently happened when a client put in a full price offer on a very nice $150k renovated home and I told him he didn’t get it and he was confused when I said there were 14 offers on the house. We’re starting to see signs of a transition.