The Morning Report
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October was a great month for home sales, with resale activity up a huge 89 percent from a year ago. Resale inventory was down 21 percent from last October.

The improving supply and demand made for a new multi-year low in the months-of-inventory figure, which tracks how fast resale homes are selling in comparison to how many are available. The 5.5 months of inventory represents an incredible 58 percent decline from the 13.1 months’ worth of inventory available in October 2007.

This is obviously a big improvement, but as always, there are several caveats.

First, sales closed in October generally represent deals inked in September or August. Economic, market, and employment conditions have deteriorated substantially in the past couple months, so future demand may not be so robust as what we see here.

Second, while inventory for sale is declining, the rapid foreclosure rates throughout 2008 imply that there are still a lot of foreclosed homes out there that have not yet hit the market. Eventually, they have to, so there may be a lot of “pent up supply” out there.

Third, a lot of what’s selling consists of foreclosures and other must-sell inventory. So sellers may on average be more motivated than the relatively low months-of-inventory figure implies.

Finally, these countywide sales figures fail to reflect the fact that activity has been improving a lot faster in low-priced areas than in higher-priced areas. I will try to write more about this disparity later this week.

— RICH TOSCANO

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