The total Months of Inventory as of July 2nd is down in the twenty-seven communities 6% from June 5th. They increased in twelve communities and decreased in fifteen communities. July 2nd average was 4.79 months compared to June 5th 5.11 months. Pending sales increased 4% while active listings decreased 2%. It appears that the market is fairly stable and in historical balance between active and pending listings. These figures tell you nothing about prices, values, or how many days it takes to be a pending sale, but only measures market activity compared to what is available for sale. It is a snapshot to where the market is, buyer’s, sellers or balanced market.

A substantial percentage of pending sales in some communities are short sales or foreclosure where buyers are able to get exceptional values, but this varies greatly from community to community. The homes that are selling that are not short sales or foreclosures are homes where the sellers recognize where the market is today and price their homes to be great values, motivated sellers. Most sellers who don’t have to sell are waiting for prices to stabilize or trend up. When this will happen is difficult to say. We have never been in a market like this one with these unique underlying causes. Our main market areas will reach this status much sooner than homes in the outlying and central valley areas where short sales and foreclosures are most common. With less total sales, there should be growing pent-up demand. Again, this is a window of opportunity for first time buyers, move up or move down buyers and investors.

Historically, five months of inventory would be considered a balanced market in the bay area. The National Association of Realtors states that six months of inventory is a balanced market for the nation. We are in a buyer’s market. This unusual situation of having large numbers of short sales, foreclosures and lenders higher qualifying standards have changed the current definition of months of inventory. We most likely won’t get back to historical standards on months of inventory until most of the short sales and foreclosures have worked their way through the system.

Months of Inventory 7/2/2008