So where are we in the market in the 3rd quarter of 2018? Pretty much tracking along as I’ve expected and shared with many of you recently but with a few new wrinkles I just learned of this past week.
Averaged across all price bands/sectors, market supply is at 3 months which is considered a low inventory/ high appreciating environment. However we’re only seeing appreciation in one main price band and even then at about a 5% annual rate vs 7-10% we would expect at 3 months supply. For context a 6 month supply (enough inventory to meet current rate of demand averaged over last 12 mths) is an equilibrium market. In that environment you’d normally see 4-6% appreciation annually in prices.
Why isn’t appreciation higher given supply overall is 3 months?
$0-$500k we are 2 months or less, severely undersupplied. and are on track for 5-6% appreciation,
$500k-$1M we’re at about 5 months supply. More of a balanced market and 3% or so appreciation. flat on appreciation or maybe 1-2 appreciation
$1m-$3m we’re at 10 months supply, oversupplied and seeing 3-5% depreciation
above $3m new construction is undersupplied but resale (especially if older than 5 years) is above 10 months and seeing 3-5% deprecitation.
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