Inventory Analysis
- According to Metrolist of Denver the inventory of single family homes for sale in the Metro Denver area dropped to 13,971. This is the first time that the number of homes for sale around here has dropped below 14,000 since 2004! Why is this significant? Inventories are at the root of a supply and demand system. I have had discussions about this phenomemon in earlier posts; see November 4th discussion titled "Why is the real estate market down?"
- Whether the inventory is down because of recent sales, or because some people want to take their homes off of the market during this time of year is difficult to say. Sales are up for the month of October, (November numbers not out yet) that could speak for some of the drop. Sellers who have had their homes for sale through the summer and into the winter, sometimes want a holiday break from marketing as well. This can also account for a portion of the decrease. Whatever the reason, the numbers are down. And down a good deal compared to the last few years. During the same time last year the inventory of single family homes was 16,775, and in 2007 it was at 20,603, 2006; 20,392 and in 2005 we were at 18,005.
- What does it all mean? Inventory analysis can be a method of gaining knowledge of economic health. It is only one indicator, there are many other methods that can and should be used as well. It is a method that looks a one of the core principles of supply and demand, and that makes it significant because it is one of the first pieces of data available. When the market turns, and it will, some of the other indicators will show us that the market is back. Sometimes, that is too late. Remember, buying low is also a principle not to take lightly. When the market shows signs of great health and it is being reported that the market is back on its feet, it also means that the prices have edged up. As the saying goes, if it is being reported, it has already happened. If you are hearing too much about the recovery, it has already happened. And since inventories show us one of the first pieces of data, we can use it as an early indicator of recovery. One that gives us some time to make that choice of when it becomes a good time to enter a marketplace, or if it is too late.
- Investing in the real estate market has risks and is not for everyone. I am, by no means, suggesting this is for you. I am a trained professional, I do this for a living. If you would like more infomation regarding real estate investment, just let me know. You can also consult your accountant, attorney, Priest, Pastor, or Rabbi about the risks involved in investing. I am, however, available to answer your real estate related questions.
