Comments on: Inventory and Sales Almost Equal, Is This The Bottom? http://www.therealestatebloggers.com/2008/05/24/inventory-and-sales-almost-equal-is-this-the-bottom/ Real Estate Blog, Mortgage, and Development News Sat, 21 Nov 2009 03:38:54 -0600 http://wordpress.org/?v=2.8.6 hourly 1 By: Kirk http://www.therealestatebloggers.com/2008/05/24/inventory-and-sales-almost-equal-is-this-the-bottom/comment-page-1/#comment-212068 Kirk Sat, 24 May 2008 19:30:06 +0000 http://www.therealestatebloggers.com/2008/05/24/inventory-and-sales-almost-equal-is-this-the-bottom/#comment-212068 The boom of the past five years was way beyond the boom that led to the 80s bust. Plus, the 80s bust was more localized in the California, New York, New England area. This one was much wider spread. Also, if rates rise like they did in the early 80s, we will really see pain in the real estate market. Houses are unaffordable at historically low rates. Just imagine what happens at 7 or 8 percent. The boom of the past five years was way beyond the boom that led to the 80s bust. Plus, the 80s bust was more localized in the California, New York, New England area. This one was much wider spread.

Also, if rates rise like they did in the early 80s, we will really see pain in the real estate market. Houses are unaffordable at historically low rates. Just imagine what happens at 7 or 8 percent.

]]> By: Rational expectations http://www.therealestatebloggers.com/2008/05/24/inventory-and-sales-almost-equal-is-this-the-bottom/comment-page-1/#comment-211887 Rational expectations Sat, 24 May 2008 13:26:54 +0000 http://www.therealestatebloggers.com/2008/05/24/inventory-and-sales-almost-equal-is-this-the-bottom/#comment-211887 This is voodoo real estate forecasting. In the stock market, technical analysts use key thresholds because they believe that individuals will que on price, or because these have been thresholds in the (recent) past and everyone knows that they have been thresholds. The analogy here is just not right. Supply is not price. One thing we CAN say is that, as supply increases, there will be (continued) downward pressure on house prices (which of course is good for buyers and bad for sellers, builders, and realtors). EVENTUALLY this should result in a pickup in sales, but there is no special magic to the 12 month figure, other than it is very bad. Can you imagine the typical buyer queing on 12 months supply? I doubt that many will even know. They WILL know when prices come down. That is the que. While we are on the subject, bear in mind that BOTH demand and supply are pent up right now. Buyers are holding off, but so are many sellers. When volume starts to head up again, median prices will continue to drop, and likely we will see months of supply go up and down several times in the coming 2-3 years. Fasten your seatbelts. This is going to be a bumpy (and very long) ride! This is voodoo real estate forecasting. In the stock market, technical analysts use key thresholds because they believe that individuals will que on price, or because these have been thresholds in the (recent) past and everyone knows that they have been thresholds.

The analogy here is just not right. Supply is not price. One thing we CAN say is that, as supply increases, there will be (continued) downward pressure on house prices (which of course is good for buyers and bad for sellers, builders, and realtors). EVENTUALLY this should result in a pickup in sales, but there is no special magic to the 12 month figure, other than it is very bad. Can you imagine the typical buyer queing on 12 months supply? I doubt that many will even know. They WILL know when prices come down. That is the que.

While we are on the subject, bear in mind that BOTH demand and supply are pent up right now. Buyers are holding off, but so are many sellers. When volume starts to head up again, median prices will continue to drop, and likely we will see months of supply go up and down several times in the coming 2-3 years. Fasten your seatbelts. This is going to be a bumpy (and very long) ride!

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