Miami — Now with Mountains!

posted on August 11th, 2008 filed under: Real Estate News

Of homes for sale, that is.

Seriously, though, there’s a question about what the inventory numbers are telling us right now.  The charts below show the months’ supply of homes for sale in Miami, Coral Gables and Pinecrest.

Months’ supply means the number of homes on the market in a given month divided by the number of homes sold that month.  The result is the number of months it would take to sell all the homes on the market if the pace kept up and there were no new listings.  Of course, the pace changes and there are new listings, so the number never goes to zero.  But this is one of the most objective and important measures of market conditions.

The perenial pattern is that supply rises at the beginning of the year with new listings, and recedes into the summer as deals from the spring market close.  So we should expect seasonal fluctuation.  In a normal market, the pattern would be a cycle within a sideways channel.  In a weakening market, the pattern is a cycle within a rising channel.  In a strengthening market, the pattern is a cycle within a downward channel.

As you look at the charts, keep in mind that the direction of months’ supply does not dictate the direction of prices, at least in the short term.  A balanced market is generally regarded as about 6 to 8 months’ supply.  Anything more is considered a buyer’s market characterized by downward pressure on prices.  Anything less is considered a seller’s market characterized by upward pressure on prices.

The data below therefore suggest continued downward pressure on prices.  But a turn in the trend is a necessary precondition to recovery, so it bears watching.

Here’s the chart for Miami.  Is it receding after a peak, or is it just making another higher low within a still-rising channel?

Miami.Inventory.2003-2008

Below are charts for Coral Gables and Pinecrest.  Are they leveled off and ready to decline?  Or are they headed higher again?

Gables:

CoralGables.Inventory.2003-2008

Pinecrest:

Pinecrest.Inventory.2003-2008

It might be tempting to see the recent declines in months’ supply as an indication that the market has turned the corner toward recovery.  But the recent data are from the spring-summer period when the months’ supply should be falling anyway.  Beware wishful thinking.

Print Friendly

posted by // This entry was posted on Monday, August 11th, 2008 at 12:58 am and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

Both comments and pings are currently closed.

Comments are closed.