Tonite on the TV news I saw a report on a conference on the home market that recently took place in the North County. The news report talked about a real estate professional at the conference stating that prices may have bottomed out and the lions share of depreciation has already happened.
I decided to take a look at the current numbers for North County to see if things have changed that much since the first of the month. In Paso Robles, inventory has dropped slightly from 457 active homes on 2/1 to 450 currently. Months of Inventory (MOI) stands at 19.6 months, down from 21.8 on 2/1.
For Atascadero, inventory has risen from 265 on 2/1 to a current count of 284. Months of Inventory is at a whopping 32 months.
As you may already know, 6 months of inventory is considered to be a neutral market. More than 6 months is a Buyers market. A market over 12 months is an indication that price reductions need to happen.
I would have liked to have heard this presentation first hand to see if there were any facts presented to back up the opinion that prices have bottomed out. But with the data that I’ve looked at, it doesn’t appear prices have come close to hitting bottom yet for the North County. There may be some neighborhoods that have depreciated faster because of a foreclosure or a home priced at what it takes to sell today which is why your Realtor really needs to do a lot of homework before you list your home. If Realtors send out the wrong message about the market to homeowners wanting to sell, the owners may sit on the market with an overpriced home as the pricing curve continues to decline. That will increase inventory even further which will create stronger downward pressure on prices. You lose money when you don’t sell month after month in a declining market. I hightly doubt this market is going to bottom out tomorrow and then appreciate 5-10% in the next few months to catch back up to the point where a lot of homes are currently priced at.
If you are sitting with a house for sale in a market with 32 months of inventory, you NEED to get in front of the pricing curve to have a chance of selling. Chasing it as it declines (or not taking any pricing action when your home isn’t selling) will not give you many chances of selling, just lots of frustration.
If you do have your home on the market for many months now, I’d contact your Realtor and insist they present to you what it will take to sell your home in the next 30 days. If they don’t provide you with a detailed analysis on current market conditions and only a recommendation based on their “opinion” without any data to back it up, I’d look to see if you can terminate the listing agreement and find a Realtor who understands what it will take to sell in this market.
If you are a Buyer, do you want to go with a Realtor that believes prices have bottomed out with an inventory sitting at 32 months? There is plenty of data to analyze to see what a good offer price is for a home. If a Realtor thinks prices have bottomed out then they are probably going to recommend going in at list price. Depending on the home, you could be overpaying. I’m not recommending low ball offers, just encouraging you to perform the same pricing analysis on a home as if you were going to sell it to come up with the fair market value.