What Does Our Level of Inventory Say About Our Market?


A lack of sellers and a lack of new construction means inventory is low in our market.

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What’s been happening lately in our Sacramento market?
As you may recall, in my last video I discussed all the reasons we weren’t in a bubble. In particular, I cited a lack of new construction and a lack of sellers.

Right now, we’re still just barely back to peak home prices, and some areas are still not back to peak prices. Over time, we’ve needed about 10,000 to 12,000 new homes a year to keep up with population growth, and since the 1970s, new home construction has never been very constant—it’s either been boom or bust. Our “boom” years had as many as 20,000 new homes, and our “bust” years had as few as 5,000. During our last “bust” year, we were down to 2,500 new homes, and we’re still  currently not back above 10,000 units

The fact is, unless something weird happens, prices cannot be in a bubble. We’ve had year after year of an average days on market of fewer than 30 days and an average of fewer than two months for unsold inventory.

The average days on market is the amount of time it takes for a home to go into escrow after the moment it gets listed, but that doesn’t take into consideration the homes that don’t sell. If homes don’t go into escrow, they don’t get included in the average days on market. What does get added to the equation is the unsold inventory, which is what the average months of inventory is—the unsold inventory that’s carried over month after month.
A surplus of new homes isn’t going to pop up overnight.
Basically, there aren’t enough places to live. Like I said, unless something weird happens, a surplus of new homes isn’t going to pop up overnight.

In other news, interest rates are going up. Prices might not appreciate as fast as they have been, but every neighborhood is different, and you can’t always tell exactly what’s going on just by looking at the numbers.

If you’re curious what your home is worth or you’re thinking of buying or selling a home, feel free to call or email me. I’d love to talk to you.

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