"Has the home market hit bottom? That is the key question for the U.S. economy in 2007. According to some housing indicators, there is some light at the end of the tunnel for homebuilders, but that cautious optimism comes with caveats."
Read the article found in the January 15, 2007 issue of BusinessWeek HERE.
"To get the most reliable signal that the housing recession is over, keep an eye on the average monthly supply of new homes for sale and the average mortgage rate each quarter. Analysis by Goldman Sachs U.S. economist Edward McKelvey of eight pieces of housing data widely used as leading indicators of the housing cycle showed those two series are better than quarterly averages of new and existing home sales, housing starts, mortgage applications, housing affordability, and homebuilder confidence."
Compare how your city has faired over the past year and half; from the "strong" summer of 2005, to the inventory highs of last October 2006, and finally to the lower winter inventories of today. (Data from EBRD, MLS).
Basically, the months supply is the ratio of inventory to sales. What it tells us is how many months the stock of homes for sale would last, if sales continued at their current rate. The "State of Equilibrium" is considered to be 6 months and the norm for housing inventory. This is the state where there are considered to be an equal number of sellers and buyers. This can also be used as a guage as to whether we are in a "Buyer's," "Normal," or "Seller's" market.
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