I met with a sales agent in the Windgate Ranch community to see how sales are doing in the new builder market. I've been reading that the new builder sentiment on a national level has been low. I wanted to see first hand what was going on with te local real estate market. I focused on Toll Brother's due to proximity to my house but also because my argument is that the higher end of the market will recover faster than the lower end i.e. higher income earner's fare better during recessions and recover sooner.
The news I got was exactly what I'm seeing in the residential resale market - sales are doing well (even during the summer months) and builder incentives to move homes are decreasing. I inquired as to why this was happening and her response was "The inventory levels are lower and not as many foreclosure's are hitting the market". Bingo - that's exactly what I think is happening. Inventory levels are now at historic low's. We have about a 2-3 months of inventory on the market. This is low. The data shows that prices should rise.
Take a look at the attached graph and let me know what you think.
I think the distressed market will be key to price stabilization. Over the past few years, distressed inventory has made up 70% of the market with a split of 40% of the market being REO's and 30% being short sales. If the REO market stops spitting out bank owned homes and the closings continue to increase, inventory should decrease dramatically. This forebodes price increases. I did an analysis on the distressed inventory and here is what I come up with.
Sincerely,
Deepak Verma
Team Advanta Real Estate
Helix Properties, LLC
(602) 295-0810
(602) 218-4361(fax)
dverma@teamadvanta.com
teamadvanta@gmail.com
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