May's Median Prices and Inventory
Median Price for the Month of May for the last 10 years:
While there are no real surprises to what’s happening with median prices on the Eastside, the chart above still remains an “eye opener” when we realize that the median priced home in Eastside market has increased from $655,000 in May, 2015 to $760,000 in May, 2016. The 16% year-over-year increase is the largest median price gain that this area has seen in years, and most certainly the last 10 years (as noted in this chart).
Months of Inventory for the Month of May:
The “months of inventory” number is tabulated directly from the number of pending home sales in the past 30 days, compared to the number of homes “Active” on the market. But in a low-inventory market like ours, is this index a reliable indication of the strength of the market? I don’t believe so.
Market is Hotter than the Inventory Index Might Appear
When the months-of-inventory drops into the fractional numbers that are charted above (and especially when below 1.0, as May, 2016 is), it is my belief that the real strength of the market is constrained by lack of available homes to purchase. To put it another way, the buyers are virtually consuming all of the available inventory as it comes on the market, and as quickly as it comes on the market.
Multiple Offers Predominate
Supporting my belief that the market is hotter than the inventory index would seem to show is the fact that it is not unusual to have as many as 5-10 offers on a well-priced and well-presented home, and yet there is only one pending contract that results from the successful sale of this home. Our current method of determining the strength of the market simply discards all of these unsuccessful buyers, but these were real buyer candidates with real offers, and they represent a real force in the market.
Inventory Expressed as “Hours” instead of “Months”
If we were to calculate the number of months of inventory on the basis of the number of real buyers seeking to purchase a home at any given time, the inventory index would probably be expressed in hours rather than months. Unfortunately, we have no tracking mechanism to accommodate these unsuccessful buyers.