Are Prices Going Up?
Posted by CJ de Heer on Tuesday, April 5th, 2011 at 12:56pm.One of the key measures of market activity shifted dramatically into seller's market territory last month, signaling a possible increase in home prices as demand outpaces supply. The Months of Inventory indicator, which shows the ratio of homes for sale (supply) to homes sold (demand) fell to four months of inventory in March from seven months in February. (See the market statistics page for details.)
What's really surprising is the number of homes for sale has declined month over month since October; inventory traditionally increases monthly after the first of the year as we approach the spring and summer selling seasons.
An even more current measure of market activity is to compare the number of properties for sale to the number currently in contract with buyers. Those properties that are in contract will show up as "sold" in the future, so the ratio of "actives to pendings" is considered the best measure of market heat.
As of today, there are 636 active single-family home listings on the market and 366 properties in contract with buyers. That ratio is considered a very active market. If no new listings came on the market, it would take less than 2 months to sell off all the current supply. When supply is low and demand is high, it puts upward pressure on prices.
So are prices going up? Basic economic principles would suggest they are.
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