A very simple but equally important gauge to the housing market is the "Months of Inventory". In most specific neighborhoods if there is between 5 and 7 months of inventory available, then the market will/should be considered balanced. If there is lets say six months of inventory then pricing should be stable, maybe a little increase for inflationary reasons, but not by demand.
When inventories exceed 7 months, that is a good indication that there are more houses available than buyers. This will let buyers be in more control and dictate the price, terms, and conditions of the sale, if the seller wants to make a deal.
When the housing market in your area has less than 4 months supply, that is an indication that sellers have more of a say in their transaction, which we all know causes a huge increase in housing prices. AKA a sellers market. For example, I just went on tour this morning in Novato, and the prices are staggering. A 4 bedroom 2 bath 2 story Contemporary home with very little land will average $875,000.00.
So how to you know where your neighborhood stands. The calculation is very simple. You will take the number of current listings in your neighborhood and divide them by the Pending sales of last month. All pending sale means is there's a contract in the works but the deal has not closed yet.
You might want to pick a specific area by price, or by one month, or by how many houses. I will give you the steps.
For any given price range or area:
1: You will want to find the number of active listings for a certain time, (day, month, year)
2: Look up the number of Pending/Current transactions for the same duration.
3: Divide the number Active transactions by the number Pending transactions.
The result should be the duration measured for that specific price, or area.
Some sights to get the information are Zillow.com, Realtor.com, or your best bet is a Realtor itself. Real Estate Agents pay good money each month for use of the MLS (multiple listing service). So have them give you the information. In my area MLS Alliance.com is great for San Mateo Counties - Santa Clara County. For Marin County please try GreatHomes.org. I do not get paid for using their names so I will. In Marin County Frank Howard Allen and Melissa Bradley are great agencies for information, and executions if you are in the market.
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FED Decision Today
As usual I got wordy in my first subject. However the Federal Reserve today voted 9-1 to leave the FED FUNDS-RATE unchanged basically at 0%, the fund rate has not moved since 2008. I will go into it more tomorrow, but in a huge nutshell rates are still incredibly low compared to 6 weeks ago, so if you have not locked in your interest rate yet, please do so as soon as you can. Rates will not be this low for long.
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