Today's KCM Blog Post: "Supply Goes Up, Prices Come Down. It's That Simple"
The big question in real estate is what will happen with home prices over the next few months. The experts have already weighed-in predicting prices will probably take another dip down. The reasoning? Put simply, the inventory of homes on the market is greater than the demand for housing.
Demand will remain stable at best. No study or report is predicting a dramatic increase in demand over previous estimates. PMI, Inc. is actually cutting their forecast back. In their most recent issue of The Home and Mortgage Market Review they announced:
“We have lowered our projection of home sales for 2010 in response to the larger-than-expected decline in sales in May.”
If demand doesn’t increase, the supply of inventory will determine future prices. Here is a great industry guideline that has withstood the test of time:
- 1-4 months inventory means it is a sellers’ market and we can expect appreciation.
- 5-6 months inventory means it is a balanced market with prices following inflation.
- 7+ months inventory means it is a buyers’ market and we can expect depreciation.
