Although many factors affect real estate pricing, in a down market, excessive inventory becomes a key driver.
How many months worth of inventory on the market gives us an idea of what’s going on. Here’s a broad guideline.
1-2 month of inventory=double digit appreciation.
3-4 months of inventory= single digit appreciation.
5-6 months of inventory= balance…Ahh, balance.
7-8 months of inventory= single digit depreciation.
9-10 months of inventory= double digit depreciation.
Historically, on a national average, homes have appreciated at a rate of 5 percent per year In the six years between 2000 and 2006 appreciation was 89% or nearly 15% per year on average. The abrupt correction in 2006/2007 was a fairly violent reaction to a period of unbridled gain. Hopefully, we have all learned our lessons and the correction of the past few years will be end up being a move back to stability.