Since early this year, the Twin Cities housing market has been making strong gains towards a level of what I call “peak inventory.” What I’m describing as peak inventory is the point where we see the number of houses for sale today at a level lower than last year. Well, we officially hit that in the weekly market report dated 5/5/2008 and are continuing that trend the last two weeks as well.
What does this mean? There’s approximately 600 fewer homes for sale today than there was a year ago and if current trends continue as they have for the last few months, we could be down more than 1000 listings by early June. At the same time, Pending Sales are still averaging approximately 12% behind last year’s numbers, meaning that while supply is down slightly, average market times are still 16.7% higher.
What do I like about this data? Well, even though market times year over year are still higher, if we continue to reduce inventory at the clip we have the most recent months, we will find market times start to fall as well. Yes, this could be some time in coming, but market times can only fall if there’s a huge surge in demand or a significant drop in supply. While most agents would say they’d rather see more sales, I’m perfectly happy to accept dropping supply… what we’re looking for is balance to come to this market as quickly as possible… there seems to be a lot of people “waiting to see what happens” before they decide to do anything.
While this is a good sign, it will be MONTHS before this trend of falling year-over-year inventory makes any significant difference. The next good sign would be when Days on Market year-over-year begins to fall as well, as this would demonstrate that the market is truly absorbing the inventory faster than it is accumulating.