Only 2.6 months of inventory – but is it REALLY a seller’s market?

According to the recently-released Housing Supply Outlook for January, there are only 2.6 months of inventory in the price segment $120K and under. The market is considered balanced at five months of inventory; fewer than five months, and it’s a seller’s market.

But is it truly a seller’s market? Typically, a shortage of supply causes an increase in prices because sellers can charge more for a product that’s in demand. But we’re just not seeing that – at least not yet.

The average price is down approximately 15% from a year ago and about 30% from the peak in 2005-2006. Dragging down the average price is the huge number of foreclosures in the lower price segments – in particular in the segment priced $120K and under. Many of these homes sold for much more just a few years ago.

Traditional sellers in the under $120K segment are especially hard hit. In many neighborhoods, sellers in this segment are challenged to compete with the still high number of deeply discounted lender-mediated listings. Do those owners who are NOT facing a short sale or foreclosure think it’s a seller’s market? I doubt it!

Let’s hope that the number of new listings – especially lender-mediated ones – continues to decline and that buyer activity continues to build. If that happens, we’ll see a more typical seller’s market that traditional sellers will welcome.


Posted by Vicky Nann on 01/13/2010
Pin It