How Quickly An Error Can Be Found!
How Quickly The Des Moines Real Estate Market Can Change
On July 14th, the Des Moines Area Association of REALTORS® changed to a new MLS software. As many of us are discovering, change can be challenging. Because this change to the new system was a hard cut over (the old system turned off on the day the new system went live) there was no way to compare the stats from the old system to the new. Because I pull many of my stats daily through a manual search and compile the results, what first appeared to be a major change in our market ended up as a result of a simple error in one of my searches.
I take great care to provide accurate and informative data in every report I produce. One report began to show a very fast change, which, given the time of year did not seem totally out of the ordinary…. until another week went by and our market showed moving from a Sellers Market all the way through to a Buyers Market. I sincerely apologize for this mistake and have taken steps to correct the report (below). Additionally, the July Recap Report also had an error and I have also corrected this report here.
The graphic of the month tells the story. Nobody felt it on July 18th, but that was the turning point of the Des Moines real estate market. This was the day that the balance of the market began to move from a Sellers Market on its way to a Balanced Market. This month I will give my explanation to why this happened, what changed to cause this and put to rest any fears that you may be feeling as a result of a potentially changing market.
REVISED REPORTS FOR JULY
What does it mean when I say we are in a Balanced Market?
In real estate, there are three ways to describe the business activity and how it relates to home buyers and home sellers. When the number of buyers are greater than the number of sellers, we are in a Sellers Market. When there are more sellers than buyers, we say we are in a Buyers Market. When there is a fairly equal number of buyers and sellers, this is known as a Balanced Market. Three weeks in to July, we began to see a sharp rise on this graphic indicating we have moved into a Balanced Market after being in a Sellers Market since February 1st of this year.
Months of Inventory and Balance of the Market
When you hear me say that we are in a Sellers Market, Balanced Market or Buyers Market, what that really means is that the number of homes are selling at a specific pace. This is known as Months of Inventory. In its simplest definition, Months of Inventory is a calculation of how long it would take to sell every single home that is on the market assuming that no more homes are listed for sale.
- Sellers Market = Less than 4 Months of Inventory
- Home values tend to rise because there is more demand than supply
- In extreme situations, buyers are in multiple offer situations competing for the same property
- Balanced Market = Between 4 Months and 6 Months of Inventory
- Home values tend to be stable
- Buyers tend to have an adequate selection of homes to choose from
- Buyers Market = More than 6 Months of Inventory
- Home values tend to decline because there is more supply than demand
- Buyers have the advantage because if they can’t get the home they want, it is likely that another one will be available
How is the Months of Inventory calculated?
Calculating Months of Inventory is fairly straightforward. You take the number of homes currently for sale on a specific date and divide that by the number of homes that went under contract during the previous 30 day period.