Lots of Listings = Depressed Prices

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.