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Explaining the Housing Market to Potential Clients, Part 3 (of 3)

Inventories—Increasingly Good News

Note: Part one of this series is here

Part two is here

Introduction

This is the third of three articles discussing how NAR data can be used by Realtors® in conjunction with local market data to provide the buyer with an overall improved understanding of the housing markets.  The national news focuses on housing problems—and potential buyers could become quite concerned based on some of the news.  However, potential buyers can become better informed actual buyers by looking at the facts—found in NAR’s Existing Home Sales statistics and in local sales and price reports.  The local market expert—the Realtor®–can compare the national numbers with local market facts to give potential buyer an improved understanding of the housing market and how to move forward, taking advantage of today’s prices and low interest rates.  NAR’s Existing Home Sales (EHS) statistics show the facts:  (http://www.realtor.org/research/research/ehsdata).

Home Inventories—Some Improving Good News

Inventories of homes for sale have been declining—and months of inventory are highly correlated with changes in home prices.  Generally, inventories of homes for sale in the range of 6 months are consistent with stable prices; lower inventories are generally consistent with price appreciation.

In recent months we have approached the six month region.

What Does This Mean To Realtors®?

The big question as of early 2012 is whether the market is turning.

  • The economic data are favorable, although slow:  jobs, interest rates, GDP, consumer confidence.
  • Inventories of homes for sale—a key market driver—have approached a level consistent with price stability.
  • The data seem to indicate that prices and sales viewed on a six or twelve month basis appear to have bottomed out at the national level—i.e., at or near the bottom.
  • NAR’s Realtors Confidence Index (http://www.realtor.org/research/research/reps) presents data suggesting that the housing markets are turning.

Market indicators are delivering messages that are better than has been the case in recent years.  Continuation of the slow improvements in housing markets is dependent on the economy, but the outlook is currently projected as favorable.

Of course, all real estate is local.  That is why a juxtaposition of local numbers—sales, inventories, prices—with national numbers can build confidence in where the market is headed—whether up or down.  As they say, a picture is worth a thousand words.  Graphs presenting the numbers should help the buyer determine whether a purchase decision—with a conservative down payment and budget—is appropriate at this time.

Jed Smith, Managing Director, Quantitative Research

Jed Smith is Managing Director, Quantitative Research with the National Association of Realtors®. He has worked on real estate issues for the past 20 years, providing input on a variety of housing, commercial real estate, tax, and planning issues. Recently he has been involved in several international studies.

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Comments
  1. Once again a very informative update. I would suggest all brokers share this in their training meetings first thing next week.