4 Reasons Buyer’s Aren’t Rejoicing Over High Inventory Levels

All we have been hearing for the past several months is how bad the housing market is. High inventory, high foreclosure rate, slow sales. All of that is true, especially in Florida, California, and Nevada where speculation ran high. In 2006, Business Week did a story on absorption rates and came up with the following cute summary of inventory absorption rates. Business Week Absporption rateIn addition to their four categories, I have added two of my own based on Miami-Dade’s inventory levels: 18+ months “ugly”; over 30 months “downright depressing”. I came up with these catagories after learning that as of July, 2007 there were a total of 38,672 condos and single family homes listed for sale on the Multiple Listing Service (MLS) compared to 1,100 closed sales during that same time period. Based on those numbers, we have a 32.9 month supply of condos and single family homes! Now that is depressing, if you are a seller.So why aren’t buyers rejoicing and buying since interest rates are still low?

  1. Some sellers are still in denial and have not dropped their prices significantly enough to bring buyers off of the fence (basic economics tells you that if supply is high and demand is low, prices need to come down, right?).
  2. Property taxes have not come down enough and are still a huge chunk of a buyer’s monthly housing expense.
  3. Insurance rates are still high.
  4. Since lenders require insurance and tax reserves up front at closing, the amount of money required at closing is significantly higher than it has been.
  5. Who would want to buy when all of the news in the media is negative (okay, that’s a freebie and wasn’t on my original list).

That being said, since real estate is all about location, location, location, individual local markets can be doing better than others or the county’s in general. Coral Gables currently has a 22.4 month inventory based on closed sales which 1925 Old Spanish Granada Blvdrepresents 582 homes for sale vs. 26 sold. 22.4 months isn’t great, but its better than 32.9 months, especially since that inventory is for the entire Coral Gables market. The inventory level for homes between $600,00-$899,000 is 18.5 months.Pinecrest has an 18.1 month inventory with 253 homes on the market in July of 2007 vs 14 sold. Again, still depressing if you are a seller but better than the county as a whole.Whether you are a buyer or a seller, find out what the inventory level is in your local market and price range to help assist you in buying or selling your home.

About The Author

Jennifer Wollmann

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