Last week I wrote about the fundamental data sequence that needs to occur in order for the market to shift back to a sellers market. To recap: First the number of sales increases, then the supply of housing falls, then prices can begin to go back up.
Well, home sales are rising and supply is falling. Below is a graph of the quarterly housing supply in Mecklenburg County over the past 5 years:
Note that the last time inventory was as low as it is right now was back in March 2008. Remember that when inventory is at a six months supply the market is considered to be in balance. When it is below six months, then you have a sellers market. When it exceeds six months, it is a buyers market. We are clearly still experiencing a buyers market, but the trend is surely heading in the direction of balance. When that happens, we can expect to see prices begin to rise shortly thereafter.
Remember when the market was hot and no one thought the market would crash the way it did. Everyone one thought prices would continue to rise forever and the general media never warned us about what could be coming. Now the tables have turned and all we hear is that prices will continue to fall and will never go back to where they were. Funny how quickly we forget.
I prefer to focus on the data, the stats, and the trends. From where I sit, all I can see is recovery; 2011 started out scary to put it lightly but as the year progressed, sales picked up momentum and have only mildly dropped off due to seasonality this holiday season. Personally, I haven’t been this busy this time of year since 2006. I’m encouraged and extremely fired up for a better market in 2012. So for now, I’m thanking my lucky starts, preparing to enjoy some time with family over the holidays, and pumped to start off the new year with a bang.
Happy holidays to all of you, my valued clients, friends, family and fans. See you in 2012.
Thanks for keeping this blog up and for your insightful analysis. I hope you are right. In my mind, the Charlotte market is about 5 to 10 year from recovering to pre-bust prices. But you can’t argue with data and so let’s hope current trends hold. Thanks Scott –
This is such a great comment….thanks so much for sharing. Declining inventory levels and a transition from buyers market to sellers market do not equate to prices immediately returning to 2007 prices. The market could move to a sellers market in 2012 or 2013 but its going to take time before prices return to the peak of 2006. Its no different than a so called “bull” or “bear” market with stocks. Consider that the Dow Jones Industrial average hit a peak of 11,000 in the year 2000. It then climbed to around 14,000 before the financial crash of 2008. Now it is around 12,000 which is really not far off from where it was 12 years ago even though there have been peaks (bulls) and valleys (bears) since.
Prior to the boom in 2005-2007, real estate in Charlotte has historically risen by about 3-4% per year. Overall, the average sales price is down around 15% from the peak in 2007. (Some areas of town were hit harder than others, but generally speaking this would be true.) If price appreciation were to return to 3% per year, it would take about five years for peak levels to return. I often hear people say that prices will NEVER return to where they were in 2006/2007. I don’t believe that for a second. But I agree it will take time. It is likely we could see some further (minor) declines or a flat market in 2012 as demand continue to pick up. But I fully expect to see some price appreciation at least in some parts of town within the next few years.
It’s not a very good market in this December. hopefully it’s a seasonal drop.