Many people today are on the fence about whether now is a good time to buy, or whether they should wait. Home buyers that have some flexibility over when they make a move continue to struggle with the potential that a home they buy today may be worth less tomorrow, and many are willing to wait until tomorrow comes, if it will help assure them that prices aren’t still falling.
One statistic that is quite telling about how balanced the market is, is Months of Supply. Months of supply is defined as the number of properties for sale divided by the number of sales in a month. In general, the market is presumed to be balanced when months of supply is ~6 months. A balanced market will yield some price appreciation, at approximately the rate of inflation, as supply roughly equals demand. When months of supply gets below 6 months, we have a seller’s market, and in that market, we expect prices to climb more steadily, with stronger appreciation the shorter the supply gets. During the height of the frenzy in 2005/2006, months of supply fell to just 2 months. When months of supply is above 6 months, we have a buyer’s market, which can lead to falling prices.
Using Months of Supply, we continue to see that the broader Phoenix real estate market is moving toward a more balanced market. At 8.5 months of supply (based on the most recent 30 days sales figures) the broader market is still assuredly a buyer’s market, but this is significantly better than just a few months ago when Phoenix was closer to 12 months of supply. As well, there are many sub-markets that are quite balanced, or even showing evidence of being a seller’s market (Tempe has 4.7 months of supply), while there are also many sub-markets that are very much strong buyer’s markets (Cave Creek has 22 months of supply).
{ 1 trackback }
{ 0 comments… add one now }