A balanced real estate market - are we there yet?
A rule of thumb in the real estate industry is that the market is balanced at five months of inventory. “Balanced” basically means neither a buyer’s market nor a seller’s market. When there are more than five months of inventory, it’s a buyer’s market; fewer than five months, it’s a seller’s market.
The just-released January monthly market outlook from the Minneapolis Area Association of Realtors January 2010 Housing Supply Outlook shows, on average, a balanced market with five months of inventory. Hold your applause. The key phrase is “on average.” In only two of the eight price segments is the market around five months of inventory – that’s in those segments priced $250K or lower.
Yes, it’s good news that months of inventory is shrinking for many price segments. But it’s not good enough. For owners of properties priced from $500K to $1,000,001, there are 13 months of inventory, essentially unchanged from this time a year ago. For folks trying to sell a home priced $1 million or over, there’s a whopping 30 months of inventory, up 34% from a year ago. These numbers are still too high, and they’re due in large part to overly restrictive lending criteria.
Don’t get me wrong: I’m not advocating a return to an anything-goes attitude toward underwriting. Buyers in every price category need to demonstrate credit worthiness, and lenders need to have lending policies that allow them to manage a reasonable amount of risk. But the pendulum has swung too far for buyers who need nonconforming loans to purchase higher priced properties. Let’s hope that lenders modify their overly-restrictive policies and return to more reasonable lending standards for those borrowers.
Posted by
Vicky Nann
on 01/11/2010