This lower supply is mainly due to the 2011 sales rate that was five percent higher than in 2010. In 2011, 250 homes sold, an average of more than 20 per month. With only 70 homes available at the start of this year, it would take less than four months to sell all the homes available at the current rate.
Real estate economists assert that when the number of homes available for sale in any particular area equals six or seven months of inventory at the current rate of sales, it is a market fairly balanced between sellers and buyers.
- When there is more than seven months it is considered a “buyer’s market”.
- Below five-to-six months it is generally considered a “seller’s market”.
Thus as of January 6, 2012, with less than five months of supply, this is a favorable indicator for sellers at least for awhile.
Where are we at?
With home sales exceeding new inventory for several weeks, prices feel like they have firmed up already. In fact, the median price level is five percent lower than 12 months earlier. If the demand trend continues one might expect prices to remain stable until the supply of homes significantly increases, as it well may within the next few months.
One reason for inventory for being so low is that some owners have taken their homes off the market for the holidays and others have decided to lease rather than sell due to the current price levels being below their expectations. It is interesting to observe that 2011 was the second year in a row that local leases were nearly identical in number to the level of home sales, and average lease values were about five percent higher in 2011 than 2010.
Another factor is that a certain number of homes may come on the market fairly soon, either as “short sales” by owners or as homes foreclosed by banks. For example, as of the start of this year, more than 15 local properties are bank-owned.
Where are we going?
Of course each neighborhood has its own price dynamics, and the condo market does not necessarily reflect the same indicators as does the house market. Also, different price ranges will have varying degrees of market balance between sellers and buyers. Therefore, owners considering selling property in the next year would do well to talk with an experienced local real estate agent to assess where their particular property might fit into this picture before deciding timing and price positioning.
With loan interest rates still remarkably low, lenders having somewhat relaxed the difficulties for getting financing, and a slightly increased level of consumer confidence, this is an environment that may continue to encourage buyers to benefit from the more affordable prices. The Palisades continues to be highly attractive to people from all over the country and that will always remain true.