Inventory - Shortage/In Balance/Oversupply

[Nikolay Pavlov]

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]

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]

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]

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.