MoCoRealEstate

Montgomery County Inventory Melting Away

July 18th, 2009 Categories: Market Updates

As a kid, the Wicked Witch of the West and her troop of flying monkeys terrified me.  I thought of Ms. West when looking at this month’s stats.  For a home seller, excessive inventory of available homes is pure evil that results in lower sale prices and longer days on the market.  I find that high inventory also erodes buyer confidence.  Motivated buyers can stay on the sidelines when they continue to see lots of homes that aren’t selling.  “Once I buy, would I ever be able to sell?” they think.  As homes start selling, more buyers get in the market.  I think we’re seeing that happen here.

Every month this year we’ve seen inventory melt away.  From mid June to mid July, total inventory went down 15%.  For the year, inventory is down over 22%.  We only have about 3,600 available homes for all of Montgomery County.  This isn’t a big number for an area of this size.  The number of distress sales has also declined – down 25% for the year.  This is a good sign for our market as excess inventory and distress sales have consistently trended down this year.

So if the Wicked Witch of the West is playing the part of high inventory, who’s playing the part of Dorthy who slays her nemesis with a bucket of water?  I think Dorthy would be the buyers and investors (mainly buyers) who are aggressively buying up lower priced homes.  They are soaking up homes priced under $700K — especially those priced under $400K.  Due to unfavorable financing, Dorthy isn’t doing much to reduce the inventory of our most expensive homes, so Ms. West can take her pick of many fine upper bracket homes in Potomac that has lots of room for pets.

OK, the usefulness of this Oz metaphor is unraveling fast, but let’s add one more character:  The Good Witch.  Really low interest rates would be the benevolent presence hovering above helping drive these purchases.  The Federal Reserve has been aggressive and creative to keep mortgage rates super low.  This isn’t the only factor helping our market, of course.  A relatively strong local economy and lower prices play a huge role.  But since Ben Bernanke looks pretty good in a pink, puffy dress with wings, we’ll give him the part.

I’ve run out of creativity required to match up the other Oz characters with our real estate market.  If you are inspired, add a comment with your thoughts.
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Posted by Bruce Lemieux

This entry was posted on Saturday, July 18th, 2009 at 1:13 am and is filed under Market Updates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Montgomery County Real Estate Market at a Glance | MoCoRealEstate said at December 3rd, 2011 at 9:29 am

   [...] interest rates and a strong local economy, buyers are aggressively re-entering the market.  A declining inventory of distress sales and overall inventory is also a strong indicator that we’ve reached the floor for our overall [...]

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