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How's the Market - Real Estate Newsletters

Inventory Levels

Inventory levels can be used to show us the 'health' of the real estate market in a town. To review inventory levels for over 40 towns not shown here, and an online copy of this newsletter, you can find both at the following website www.MAPropertiesOnline.com.

If an inventory level graph shows seasonal fluctuations then we know that the market is 'healthy' and showing normal activity. If seasonal fluctuations are not obvious then what we are seeing is an 'unhealthy' market where foreclosures, short sales and supply outstripping demand have cluttered and hidden the normal seasonal trends of the market.

In a normal, healthy market we see seasonal fluctuations with inventory - the peak inventory months being spring when most sellers bring their homes onto the market. Then inventory levels drop slightly in summer when homes are selling, but fewer homes come onto the market, so the net movement is reducing inventory levels. The levels increase again in autumn when buyer and seller activity increases and more homes come on the market for the fall season. Levels then drop off when sellers take their homes off the market for winter, and buyer activity eases when both buyers and sellers start thinking about holidays and the cold keeps people indoors, and thinking less about selling or buying a home. So, in a 'normal 'healthy' market we should see 'ups and downs' of inventory levels that correspond to a season of the year.

Pricing trends can be learnt from inventory level data - in a 'healthy' market with demand greater than supply, and overall reducing inventory levels year on year, prices tend to move up. In an 'unhealthy' market where supply far outstrips demand then the trend on prices is down. This follows the normal Supply and Demand market dynamics.

The graph for Lexington shows declining supply over the last couple of years, and very low inventory levels currently. This is what we are seeing 'on the ground' and supported by additional statistical data points (absorption rates) that show that all price ranges within Lexington have less than 7 months supply. Over 7 months supply generally indicates that there is an oversupply in that price range, anything less tells us that the market is experiencing more demand than there is supply. Reviewing absorption data for the town, you can see several price ranges which have less than 1 month supply of homes. With limited supply, we see a trend of increasing prices as competition for the available inventory increases.

Many agents have several buyers all looking, and waiting, for homes to come on the market in different price ranges, and competing offers ensue with many new homes coming on that are priced competitively. This is especially the case in the under $1,000,000 price point, but there are several price ranges over the $1,000,000 range where there is very limited supply and very 'healthy' demand. Some agents, myself included, let other agents in their office know that they have buyers who are looking within a certain price range and to let them know as soon as a listing contract is signed so that their buyers get a bit of a 'heads-up' on new listings.

The 'health' of the Lexington real estate market can be further validated by the increase in average sales price for Lexington. Reviewing the Historic Home Prices data on my website you can see that the average sales price for Lexington has bounced back to pre-crash prices, and in fact, has been increasing steadily over the last 3 years.

The graph for Belmont shows significant inventory level declines over the last 6 years. Not only does Belmont have significant reducing inventory levels it also has very typical seasonal fluctuations. Combine this with the absorption rate data which shows most price ranges with less than 1 month supply you get a very clear picture that there is far more demand than there is supply in this town. This is further validated by reviewing the Historic Home Prices graph which shows only one year in the prior 10 years that has had a higher average sales price and that was at the peak of the market in 2006.

The graph for Bedford shows an example of where the market was certainly suffering more than some of the towns we've reviewed so far. In 2006 and 2007 the expected seasonality with reduced inventory levels during winter is not seen, telling us that there were a significant amount of homes on the market that 'had' to sell and couldn't wait the winter out to relist again in spring. Interestingly, even though we are not seeing dramatic inventory level declines in the last few years we are seeing the average home price increasing in the last year to peak higher than any prior year. Over the last 5 years we are seeing a 'healthy' seasonality trend.

The graph for Arlington shows us what we would expect to see with the market being 'healthy'. Homes on the market in Arlington, if priced well, sell very quickly as the town is a popular one for young families and young couples looking to be close to Cambridge, and with a decent school system. This winter we have seen just over half of the homes on the market typical for a 'normal' winters reduced inventory.

Winchester's graph shows consistent inventory trends over the last 5 years, with a dramatic reduction in 2013. The peaks are very similar, the troughs are similar and the timing of the seasonality impact is similar. This shows a very stable, and 'healthy' real estate market with dramatically reduced inventory in the last 12 months.

Its important to reiterate that to determine which town you should spend your money in requires multiple sets of data to be evaluated in conjunction with each other. Small subsets of data will show a 'glimpse' of what may be happening but it is only when everything is considered that the totality of the picture can be gleaned as to the real estate market in a town. Additional data points can be found at http://www.MAPropertiesOnline.com

If you'd like to chat more about these statistical pieces of data and how they relate in the real world of real estate, then please don't hesitate to contact us.

If you would like an estimate of what your home would sell for in today's market I would be more than happy to come by, have a look at your home, and then provide a CMA (comparative market analysis) which will provide you with an estimate of what your home should sell for, along with a marketing plan to get maximum exposure for your home.

If you'd like to chat more about the topic presented here, or the Real Estate market in general, then please call me on (617) 997 9145, or email me at Dani.Fleming@MAPropertiesOnline.com.

Lexington Statistics







MLS data is provided by MLSPIN. While MLS data is believed to be accurate, it cannot be guaranteed. MLS data is constantly being updated, making any analysis a snapshot at a particular time. All raw data remains the intellectual property of MLSPIN.
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