A New Inventory Measurement Tool
I am constantly on the look out for new ways to demonstrate the current market (that being what interests most of us) and I have added another calculation to my table: the ratio of pending sales to pending and active combined. For example, if there are currently 50 homes for sale of which 25 have received an offer, my stats will show pending 25 and active 25. The new calculation is the ratio of pending – 25 – to pending and active – 50 – or 50%. Thus the higher the ratio the greater number of houses for sale with an accepted offer and, conversely, the smallest percentage available for sale to a buyer. Note that this calculation should be more reflective of current market conditions than the usual supply figure shown, which is based on sales for the last 12 months.
Source: MLS, Oliver Reports
Let’s see how this looks in a chart:
Source: MLS, Oliver Reports
There is quite a good correlation between the two numbers. Those towns with supply of around 3 months (left hand scale) have a ratio of +/- 50%, those with a ratio in the 33-38% range have supply of about 5-6 months, and those with a ratio of 26% or less are the only ones with above average supply also based on historic numbers.
My first reaction is that this might be helpful if and when it shows a deviation in the P/P+A ratio compared with the historic supply. I will monitor this.
If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or [email protected].
Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty
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The trend lines seem to me to provide be the most interesting data. If the ratio is going up, either the market is heating up, or supply is not being replenished. On the other hand, a dropping ratio would be a leading indicator of a cooling market.
I agree. What it means is that I have to monitor these numbers for each town to help in individual analysis, but I could start with tracking the composite numbers for say the North Shore, Essex County and Massachusetts.