Monday Moanin' Market Update

Since it's the beginning of a new week, I thought we'd start off with some good news. Plenty of time for the junk later on.

As I've mentioned a couple of times, inventory in the local Detroit market seems to have leveled off. For those of you who have been following my blogs this will be old news but for newbies here's a quick refresher.

Inventory is the leading indicator of the Real Estate market. Prices are the lagging indicator, simply meaning that prices follow the market. Prices indicate where the market was, not where it is. This is why it's so hard to time a purchase by looking at current prices. By the time prices rise, the market has been in recovery for some time and you missed the bottom.

O.K., since this isn't an economics lesson I'll get on to Real Estate. We look at 3-6 months of inventory as a "normal market". This is where there is enough inventory to allow buyers a choice but not so much that they don't have to buy. Prices should stay relatively stable at this level. More than six months and we have a buyers market. There are a glut of homes and buyers can pick and choose what they want. Less than six months is just the opposite. Buyers have to jump on the first house they see and there will probably be multiple offers. They more than likely have to offer more than asking price. There! That takes care of that.

In recent studies I've conducted of the market show that inventory levels in the Detroit area stabalizing. That means prices should stabalize as well. Here're some examples. The City of Detroit is showing an inventory supply of 5.81 months in June of '09. Contrast that with 20.14 in march of '08 and the difference is amazing. Other towns have had similar stabalization. Livonia showed 15.60 in March of '08 and 6.65 in June of '09. I also have levels for Troy, Novi, Northville Plymouth and other cities, so if you want more detail, give me a call or e-mail and I'll get you the stats.

What all this means to us as consumers is there may be good news on the horizon. It's too early to party in the streets but a small private "whoo-hoo" maybe appropriate. A little hope is a good thing.