What does the MOI mean for prices? I'll let this realtor from Phoenix explain:
It’s widely agreed that when inventory levels fall between 5 & 7 months, that the market will be considered balanced. Housing prices should be stable, perhaps rising slightly, influenced more by inflation than by demand. When inventory levels exceed 7 months, then the demand for housing is low, and prices are likely to fall. The high number of homes for sale will create a buyer’s market, allowing buyer’s to dictate price and terms to the majority of sellers if a seller wants to make a deal. When inventory levels fall below 5 months, sellers have more control over price and terms, often resulting in a more significant rise in housing prices, aka a seller’s market.So let's take a look at the last 7 years in Victoria history. Note that months of inventory is for all residential properties in greater Victoria, including single family homes, condominiums, townhouses, and manufactured homes. Previously I only had monthly data back to mid 2008, but Marko Juras has kindly provided monthly price, new listings, and sales data going back to 1990. Huge thanks for that!
|Victoria Residential MOI and SFH Price (click to enlarge)|
What will happen next? It's anyone's guess but notice the steep rise in MOI in the past few months. We are now at the highest level since the financial crisis. Of course the fall will bring some declines here, so another way to look at it is by factoring out seasonal variations and examining the 12 month rolling average of both price and MOI.
Next up: What does a market bottom look like? Can it be predicted by the MOI?
UPDATE: How odd is 12 months of inventory in September? Very odd.