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  #1  
Old 11-02-2009, 09:46 AM
CSP 49 CSP 49 is offline
 
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Default How many months of supply is oversupply?

I'm doing several condo appraisals and am coming up with substantial differences in absorption rate in the general market vs. my projects.

How many months of inventory is considered oversupply?

The absorption rate has been steadily increasing but with these apartment to condo conversions, foreclosures/new inventory is still outpacing sales.
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Old 11-02-2009, 09:59 AM
Randolph Kinney Randolph Kinney is offline
 
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Quote:
Originally Posted by CSP 49 View Post
I'm doing several condo appraisals and am coming up with substantial differences in absorption rate in the general market vs. my projects.

How many months of inventory is considered oversupply?

The absorption rate has been steadily increasing but with these apartment to condo conversions, foreclosures/new inventory is still outpacing sales.
Excessive inventory should be looked at in a historical prospective and DOM.

Months of inventory is coupled with declining markets or increasing markets.

It is possible to have a declining market with very short DOM and a balance with inventory because it is driven by REOs. Normal listing take longer to sell if they are priced higher than distressed sales and may distort what is going on or visa versa.
  #3  
Old 11-02-2009, 10:54 AM
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Joyce Potts Joyce Potts is offline
 
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That's why I'm loving the 1004MC if done correctly! Just don't fill it in, read it.

And I don't agree that excessive inventory should be looked at and judged within an historical perspective. In my market, we have unprecedented market conditions with current, competive listings that often have more (or as much) meaning than 90 day old closed sales.
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Old 11-02-2009, 12:03 PM
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CSP,
So how many months of over supply do you have?
How many projects are in auction?
  #5  
Old 11-02-2009, 01:03 PM
CSP 49 CSP 49 is offline
 
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Originally Posted by Elliott View Post
CSP,
So how many months of over supply do you have?
How many projects are in auction?
There's approximately 1 year supply. While the vast majority of the sales, pendings and actives are distressed (REO/Short) there are no bulk liquidation auctions by any large sellers.

I guess this is causing me to overthink the meaning of oversupply when on one hand I have a year of inventory (which I consider high for most markets in Central FL) but have a steadily increasing absorption rate and low DOM of 35 days.
  #6  
Old 11-02-2009, 01:32 PM
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AFAIC, if it were going to take me over 4 months to sell my house,
though Fannie says it's normal, I'd sure think there's oversupply.
At over 9 months to sell, I'd be sure there's oversupply
At a year, I'd be tearing my hair out.

For what it's worth, the original 1004 was set up so that the boxes would (theoretically) line up
... Declining/Oversupply/Over 6 mos
... Increasing/Shortage/Under 3 mos

.
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  #7  
Old 11-02-2009, 01:43 PM
Ken B Ken B is offline
 
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If prices are declining, supply exceeds demand.

If prices are stable, supply equals demand.

If prices are increasing, demand exceeds supply.

Notice that nothing was stated about marketing time, although changing marketing times may be leading indicators of future supply/demand characteristics.
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  #8  
Old 11-02-2009, 06:10 PM
Bama Bayou Bama Bayou is offline
 
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Quote:
Originally Posted by Ken B View Post
If prices are declining, supply exceeds demand.

If prices are stable, supply equals demand.

If prices are increasing, demand exceeds supply.

Notice that nothing was stated about marketing time, although changing marketing times may be leading indicators of future supply/demand characteristics.
Ken, I'm not buying that rationale. In my market we have a 15 month supply of beach front condos and prices have been stable in almost all market segments since March of this year. I don't think a 15 month supply for resort condos in the 200k to 500k price range is in balance with demand. The problem here is about 80% of the condos are waaaaay over priced relative to the asking prices of the constant influx of foreclosures.

The supply and demand of foreclosed properties may be in balance, which may be the reason prices are stable, but not the overall market. The units with the inflated asking prices are next months foreclosures.
  #9  
Old 11-03-2009, 08:47 AM
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Mike Garrett, RAA Mike Garrett, RAA is offline
 
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Would you believe...."it depends!"

Should we base it on historic trends or forecasting?
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  #10  
Old 11-03-2009, 08:52 AM
CSP 49 CSP 49 is offline
 
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Quote:
Originally Posted by Mike Garrett, RAA View Post
Would you believe...."it depends!"

Should we base it on historic trends or forecasting?
Kind of like the Supreme Court and porn. I know it when I see it.
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