We’ve heard of the metric that measures the supply and demand in residential real estate sales. Lance called it the key housing metric going into 2025, but he is suspicious of its accuracy:
A rule of thumb in real estate is that anything below a 6-month supply of inventory is considered a ‘seller’s market,’ while anything above a 6-month supply is a ‘buyer’s market.’
However, that hasn’t always held true this cycle, and ResiClub’s view is that this rule of thumb is a bit outdated. In many housing markets, including Austin’s metro area, where house prices began to decline in June 2022 with only 2.1 months of inventory, that rule hasn’t applied effectively.
In fact, despite Austin’s months of inventory only reaching a high of 4.8 as of August 2024, house prices have already dropped by -19.8% from their 2022 peak in Austin. A better measure of this incoming pricing weakness was the abrupt active inventory jump that occurred in Austin in spring/summer 2022 (going from 0.4 months of inventory in February 2022 to 2.1 in June 2022), which quickly pushed active listings above pre-pandemic levels.
I agree that using six months is outdated, and four is probably too high also.
Let’s use three months as the new standard.
It is hard to believe how well our local market is doing.
There have been 120 closed sales this month between La Jolla and Carlsbad with a median sales price of $2,617,500 which is about 9% higher than last month when there were 165 sales! With the 120 sales already in the books, it means the final count should be around 150 sales in October – even with the political circus going on!
There are 470 NSDCC houses for sale currently, and the number has been steady.
Let’s do the math: 470/150 = 3.13
If three is the new standard, it means we are at the limit of a seller’s market. With higher rates and election backwash in November, it means this measuring stick will almost certainly be indicating a buyer’s market for the last two months of 2024.
