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Inventory - Shortage/In Balance/Oversupply

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Nikolay Pavlov

Thread Starter
Sophomore Member
Joined
Jun 21, 2006
Professional Status
Certified Residential Appraiser
State
New Jersey
When would the inventory be considered low? Or high? Any ideas? My instructor says that if active+pending are little over past year sales, then there is balance. I'm curious what do you think, when the inventory is considered low? 1 month, 2, 3, 6, 12? Thanks.
 

cmitchell

Sophomore Member
Joined
Jul 17, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
I personally like seeing less active/contract listings than sold prior 12 months. Of course make sure your defined research area is the same through out the research so the stats are useful. Also, the active/sold ratio trending data over several years is helpful. I look at year to year data, neighborhood data, price trends with ratio data to develope an opinion about the market status.
 

MRB

Junior Member
Joined
Feb 22, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
typically supply and demand will be in balance when the absorption rate of inventory is 6 months +/-. ill look at 24, 12, 6 and 3 month time periods for a trend in home sales and consider seasonal factors when determining the market's absorption rate.
 

Amy Perkins

Senior Member
Joined
Jul 20, 2003
Professional Status
Certified Residential Appraiser
State
Tennessee
It really does depend on the market. First I determine what kind of market is applicable to the property I am appraising, then I extract a supply and absorption rate. In a normal market with no REOs and stable pricing, I would say over six months is a slight oversupply. When you get to ten months or a year for a long period of time that is when prices begin to drop. What I see alot of in the beginning of a declining market are no condo sales and lower end single-family properties selling for what the Condos were. However, in some REO markets I have seen properties with a supply in balance, but since they are all REOs or Short Sales, prices keep dropping to liquidate and stay competitive.
 
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