Good News For Southeast Michigan

The old axiom that "Real Estate is local" has never been more true. I read about all the bad news and the declining markets across the country but that's not what I see here.

I've kept careful stats on inventory for the last few years and they're very telling. If you've read my blog before what I'm about to say will be a repeat. If your new listen up.

Price is not what drives the Real Estate market! Price is a lagging indicator. Price follows inventory, which is a leading indicator of the market. As inventory goes up, buyers have more choices and are not as pressured to make a decision. Sellers have to adjust prices, usually down, in order to generate an offer. If inventory is above, say 6 or 7 months, then we have a definite buyers market. In 2007, the city of Detroit had over 24 months of active inventory to sell.

If there is less inventory, prices go up. For the sake of discussion we'll consider anywhere from 4 to 6 months of inventory a "normal market", whatever that means.

Here's a chart from September of 2008 showing inventory in Detroit and a few surrounding towns.

As you can see, Livonia Michigan had an inventory of 9.63 months. Now look at last month.

Look at Livonia now. 4.45 months of inventory. As expected, we're seeing a slight uptick in prices.

What does this mean to us in Southeast Michigan. If you or someone you know is thinking about buying, it's time. If you're an agent, share this with all your clients. They need to know that things aren't as bad as the media tells them.

Good luck and happy house hunting.