Misleading Market Indicators

As of late, I have been a bit concerned about housing inventory. Primarily because the biggest price drops tend to occur in the last quarter of the calendar year when it is more difficult to sell a home (at least over the last couple of years). So I checked in on our local listing service, Metrolistmls, and was in for a very pleasant surprise. They have recently rejiggered their site, so you can now search by status (active, pending, and sold). This is great news for us market watchers and data hounds.

What is even better, is that I can now easily calculate "months inventory", which is a key market statistic for determining supply and demand. With a click of a button (single family homes under 500k), for both El Dorado Hills and Folsom, I was able to see that EDH had 109 homes pending, and 138 that are active. Meanwhile Folsom has 165 homes pending and 207 active.

The results of both these queries shocked me (perhaps someone can double check my queries). This is a little over one month of inventory for both markets assuming all the PS close in 30 days. Of course, more realistically (dealing with banks), homes can take around 3 months to close, but even then, that is still only 3 months inventory.

So just maybe, the positive trends I have seen over the last couple months in these areas will hold. For instance, the number of foreclosured homes in EDH is back down to levels not seen since mid 2008. Some could argue that the banks are holding back inventory, and that a flood is coming, but the whole shadow theory has lost credibility in my eyes.

I'm feeling more confident that we have indeed found bottom, and are now scraping along.