Slumping volume & rising
inventory
October 11, 2018 By Ryan Lundquist 12 Comments
Volume is down and
inventory is up. Is that a problem? It sounds like a question for a high school
Economics class, but here we are talking. Today I want to kick around two quick
thoughts and then dive deeply into trends. I hope this helps – whether you’re
local or not. Anything to add?
Here are the two big ideas to talk through right now.
This could be a problem: If
sales volume continues to slump and inventory rises without buyers absorbing
new listings, it could be a sign the market is changing in a big way. No matter
how we look at it sales volume has been down lately in Sacramento. This was the
weakest September since 2007 as volume was 14% lower than last year, and
quarterly volume was down about 6% too. But keep in mind overall the year as a
whole has actually seen strong volume, so it’s not like sales have fallen off
the face of the earth (but it’s a concern we’re seeing the numbers change over
the past few months). Housing inventory is also up and we haven’t seen it this
high since 2014.
This could also be a dull fall: Despite
the numbers seeming gloomy right now, they’re actually really consistent with
what the market showed in 2014 when we had an extremely dull fall season. In
fact, quarterly volume that year was down 6% and September volume was weak too.
Does that sound familiar? Also, we have a nearly identical level of inventory
right now compared to then too. I don’t say this to sugar coat any red flags in
the market, but only to give pause
and say what we’re seeing right now could simply be a very dull fall season.
We need more time: The
truth is we need time to see how the market will pan out. For now we live in
the tension of not knowing the future and interpreting
trends for the present. My advice? Watch closely, be careful of hyped
headlines, and be sure to take a wider view of the market too (let’s not forget
2014).
I hope that was helpful.
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