Read enough about the Phoenix (or elsewhere) real estate market, and someone will start spouting statistics. And while market stats are important to understand, one must exercise extreme caution in interpreting them, or listening to others interpretations.
Let's take a look at "Days on Market" (DOM), or "inventory", or "months supply". Whatever you prefer to call it, it is an oft-cited indicator of overall market conditions. And generally speaking, it's not a bad indicator. The supply of homes available for sale is a key component in understanding the overall real estate market conditions.
It is important to understand a few things though:
Our current market really consists of three major categories of inventory:
- Bank/lender owned homes (also known as REOs);
- pre-foreclosure/ short sale properties; and
- "normal" properties (homes that are owner/investor owned and not in a pre-foreclosure status).
Real estate is local. And the Phoenix metro area is a BIG place. Any time statistics or price indexes are quoted for the entire Phoenix area, you have to understand that conditions across the Valley can vary dramatically. Even within a suburb, conditions can vary from subdivision to subdivision. Within a single large Master Planned Community, conditions can vary from neighborhood to neighborhood.
The supply of homes is a perfect example. The general consensus in the real estate industry is that a six-month supply of homes is considered a "balanced market". Less than a six month supply means we are in a seller's market and more than a six-month supply is an indicator that we are in a buyer's market.
At this moment in time, if you look at all the available inventory of homes across the Phoenix metro area, there is a 5.2 month supply of homes.
If you're a seller, you may be thinking, "Hallelujah! Phoenix is a seller's market!" and if you're a buyer you may be thinking, "Crap. I should have bought a home a couple of months ago when it was a buyer's market and I would have had more negotiating power."
Let's look at the categories of inventory that make up this number...
Continue reading "Real Estate Statistics - Not Always What They Seem" »







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