Sunday Pilot Article: Months supply.

Posted On March 7, 2011

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As of January 1st, 2011 the article in the paper said  there was 13.4 months supply of inventory on the market, and that a price stable market is about 6 months.

Nationally, experts agree somewhere around 6 months is a stable market. Smaller markets like Steamboat have a higher stability point, somewhere around 9 months. Which is closer to 13.4 and therefore we are closer to stability…..except!

Using one month of data in our small market creates great fluctuations in your data. Allow me to demonstrate; using the same search referenced in the paper, there are currently 149 houses for sale. In February there were 3 sales, resulting in 49.6 months of inventory. A HUGELY different market than 13.4 months.

If we take a three-month time frame (Dec-Feb), we have 24 sales which is 8 sales per month. To compute the number of months of inventory we divide the 149 listings by 8 sales to get 18.6 months. If we take the sales for the past year, we have  89 sales which is 7.4 per month. 149 / 7.4 = 20 months supply.

Using one month of data doesn’t generate statistically relevant results. 18-20 months is much more accurate than 49 or 13.4.

A year ago the market was at a three-year supply and we are already less than a two-year supply, so hopefully in a year from now we will be at a one year supply which is pretty darn close to a price stable market.

Stay tuned for real estate value expectations during the next year.

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