40,000 listings — what does that mean?

by Jay Thompson on May 15, 2006

At this moment in time, there are 40,017 listings in the Arizona Regional Multiple Listing Service (ARMLS). That’s a lot of inventory. Especially when compared to January 2005 when the MLS listings equaled 3,402.

People ask us all the time if we are in a “Buyer’s market” or a “Seller’s market”. I don’t believe anyone has ever tossed “Neutral market” into the question.

Compared to the outrageous seller’s market of early to mid last year, this sure looks like a buyer’s market. But ANYTHING would look like a buyer’s market compared to that. It was insane.

I’ve read and heard several “experts” proclaim that a real estate market that has six months of inventory available can be classified as a neutral market. (I’m looking for a source for that and will post it here when I find it).

In April, there were 6,751 homes sold. Do the math and that means there is currently 5.9 months of inventory listed. That’s close enough to six months for me. So “mathematically” we are in a neutral market. But as my college statistics professor once said, “you can prove anything with statistics”.

Real life experience tells me we are in a Neutral to slight buyer’s side market. However there are a lot of people out there that would argue this assesment (and please feel free to do just that in the comments). What makes me feel we’re in a neutral market? It’s hard to pin it down. We’re still seeing buyer’s filter back into the market. Sellers are getting more reasonable in their expectations for listing prices. There are pockets of places where the market is still very hot, and others where it is significantly cool. But over all, across the Valley and across the types of real estate, we are in a neutral to slight buyers’ market, in my humble opinion.

I’d love to hear other’s opinions…

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The AZ Real Estate G

Thanks for the article and link Frank! I haven't had time to digest it yet (the actual paper is 60 pages) but it looks *very* interesting...

And I love seeing things like this is a paper on real estate:

y = a ln[1+ g] + (1-a)y-1 + e

Reminds me of my previous life in semiconductor engnieering!

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Frank

Have you read the research of the two professors at Pomona College?

Pomona College Faculty Research: April 2006

What Real Estate Bubble?

New research from Pomona economics professors Gary Smith and Margaret H. Smith shows homes actually are undervalued in most of the 10 U.S. markets they studied.

“Most of the country is certainly not in a bubble if you define a bubble as prices far above fundamentals,” said Gary Smith, who is the Fletcher Jones Professor of Economics at Pomona College. “The average person in the U.S. is still better off buying than renting.”

San Mateo County in the San Francisco Bay area was the only region studied where homes were overvalued, by 54 percent. Elsewhere in California, Orange County prices were about right, while homes in Los Angeles (11 percent under) and San Bernardino (20 percent under) counties still were somewhat undervalued. Beyond California, homes also were undervalued in Boston (12 percent under) and Chicago (17 percent under). Undervaluation was dramatic in Dallas (40 percent), Atlanta (53 percent), Indianapolis (65 percent) and pre-Hurricane Katrina New Orleans (46 percent).

http://www.pomona.edu/atpomona/apr06.shtml

Gary Smith is the author of more than 50 articles and several economics textbooks He earned his B.A. in mathematics at Harvey Mudd College and his Ph.D. in economics at Yale University. Margaret H. Smith, an assistant professor of economics at Pomona College, earned her B.A. at Yale University and her Ph.D. at Harvard University (both in economics).

Excellent point Mark! Builder's incentives for both new builds and specs are getting pretty crazy right now. Not only are builders offering incentives to buyers, they are offering them to agents who bring buyers. A year ago many builders cut buyer's agents commissions to ZERO. Now some ar eoffering 6, 7 even 8%...

Mark

For what it's worth I would agree with the idea of a resale market slightly tilted toward the buyer in my area. It's a completely different story with new homes though. I spoke to my builder's rep yesterday and he told me stories of spec homes going on sale (this weekend only kinda thing) for $100K off. That's a lot of coin *but* it's closer to the realistic price they should have been asking for in the first place.

u00e2u0080u009cMost of the country is certainly not in a bubble if you define a bubble as prices far above fundamentals,u00e2u0080u009d said Gary Smith, who is the Fletcher Jones Professor of Economics at Pomona College. u00e2u0080u009cThe average person in the U.S. is still better off buying than renting.u00e2u0080u009d