Every month I review statistics for the Detroit and surrounding areas. The trend over the last years has been positive. Inventory levels have remained even or have dropped. What does this mean to the consumer?
If you look at the Real Estate Market's indicators, inventory levels are a leading indicator. They're the first things to point out a market trend or direction. Everyone focuses on prices but prices almost always lag behind inventory.
Here's an Excel sheet I've used to measure market inventory. Rule of thumb is that 4-6 months of inventory is a normal market. If there is more inventory prices drop due to too many choices for a buyer. If there is less inventory, the buyer must make a quicker choice and will much more likely be in a competitive bidding process.
| Active | Pending | Sold | A/Inventory | P/Inventory | |||
| Detroit | 3052 | 1067 | 2615 | 7.00 | 2.45 | ||
| Livonia | 428 | 128 | 527 | 4.87 | 1.46 | ||
| Canton | 270 | 88 | 389 | 4.16 | 1.36 | ||
| Novi | 212 | 52 | 197 | 6.46 | 1.58 | ||
| Troy | 356 | 93 | 353 | 6.05 | 1.58 | ||
| Northville | 184 | 53 | 153 | 7.22 | 2.08 | ||
| Plymouth | 152 | 28 | 195 | 4.68 | 0.86 |
The above table shows that the city of Detroit has a 7 month supply of inventory. This is up almost 1/2 month from Decembers numbers. This could signal another price drop if the trend continues. Plymouth, on the other hand, is down about 1/2 months of inventory form December.
Now, you can't take one month and predict a trend but if you look at 6 months you can get an idea of where the market is going. Some of the factors that could affect the market are unemployment not expecting to get much better soon as well as other general economic trend. Still, it bears keeping the stats in mind if you are an investor looking to purchase.
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