Excess Inventory drives prices down

You have probably noticed that there is a lot of homes with a “For Sale” sign in their front yard. Homebuyers have the largest selection of locations, styles and price ranges available in years but only a few are taking advantage of our “buyers market.” What’s up with that?

It seams that the more properties for sale, the fewer sales are taking place. Excess inventory of anything will drive down prices. Buyers have no sense of urgency, believing that if they hold off, home values will drop further. They could be right? Or not.

A 6-month supply of homes fro sale is considered a normal market by housing experts. Over a 6-month supply and it is a buyers market. Less than 6-moths a sellers. In 1995 Sacramento County had a 16-month supply of homes available for sale. Today Sac. has about a year’s supply of unsold homes. In 1996 the unsold index dropped quickly to just below 8-months and kept falling to its lowest point in 2003 at under 2-months. Each month that inventory fell prices climbed. It was a quick turnaround that surprised many. This is my fourth market correction in 35 years of practice. (I received my real estate license at age 12.) If history is any indicator of future performance, no one can predict when our excess housing inventory will decline but we can rest assured that it will.