I promise not to turn this article into one of my boring, lengthy diatribes that only a data nerd could enjoy, however, I do want to discuss something that I think is very important for all home buyers, sellers and investors. Given that today there is a plethora of “data” and “information” available to us thanks, in large part, to the internet, and that home buyer, sellers, and investors (as well as the real estate agents working with them) make decisions based, at least in part, to those things, it is imperative to know you have the right data and that it is the relevant data or information. Making a large financial decision, such as one related to buying or selling a house, on inaccurate, misunderstood or mispresented date or information, can literally cost you thousands of dollars.
A quick, and current, example…The St Louis Housing Inventory…
A report was released this past week from within the real estate industry that indicated there was an “inventory of homes for sale” of 3,272 in the City and County of St Louis combined and that this was “down 24.9% from 2018“. I saw many well-meaning real estate agents copy and paste the graphic or data on Facebook with messages that, if a buyer would create a little bit of a panic or concern on “missing out” and, if a seller, thinking competition is down so now is a good time to list your home and name your price.
Here’s the catch…Even though I’ve reviewed the report, and have access to the same MLS data that the report was prepared from, I can’t reconcile the numbers and am coming up with a different picture of the market. Before I go further, I want to stress I’m not criticizing the source of the report, they did like just about every other organization and the news media does and passed on a report or information from a credible source. It isn’t necessarily their job to drill down in the numbers or figure out if the way it is being reported is relevant to the end user, that is the real estate professionals job. I also don’t fault well-meaning agents that are just trying to share information they believe may be important to their clients and consumers, I’m just suggesting that real estate agents need to know the data, and make sure what they are presenting, and how they are presenting it, is accurate and relevant to their clients and consumers. Now for a quick, shameless plug: This is why at our firm, MORE, REALTORS®, we have much time, money and effort developing our own proprietary software to present the most accurate data we can, in the most usable and relevant form, to our clients and consumers. It is also why our agents spend so much time in training on this topic and work hard to stay abreast of the market.
Here’s how I see housing inventory in St Louis...
Lets start with discussing the difference between “inventory” and “supply”. Inventory, when applied to listings, typically just refers to how many active listings there are, so how many homes are for sale at this time. While this is important information, I think supply is much more relevant to home buyers, sellers and investors. Supply, usually expressed as “months supply” indicates how many months it would take to “sell out” of listings based upon the current inventory and sales rate. The key here is supply takes into account how many homes are selling. Obviously, if there are a ton of homes selling, and at a fast pace, the inventory (or number) of listings increasing may not be a big deal at all. However, if there is nothing selling then even if the inventory falls 50% it may not be a big deal.
Let’s first looking at Inventory…
Even though I don’t see the inventory number as that critical, since the report I referenced indicated the inventory of homes for sale in the City and County of St Louis was down 24.9% from last year, let’s look at that first. Below is a chart from MARIS, the regional MLS for REALTORS®, showing the number of active listings (single-family residential in the City of St Louis and County of St Louis) at the end of each month from January 2018 through January 2019. As the chart shows, there were almost the same number of active listings in January 2019 from a year ago. January 2019 had 2,584 active listings just 1 more listing than January 2018 when there were 2,583.
St Louis City and County (combined) Number of Active Single Family Residential Listings
Now lets talk about supply…
As I mentioned, the supply of homes for sale, based upon the current sales rate, is, in my opinion, a key metric for home sellers, buyers and investors to consider. It goes back to the simple law of supply and demand: when supply is low and demand is high, prices tend to rise, when the reverse is true, prices tend to decrease.
St Louis City and County combined…
The supply of homes for sale has actually increased 10.7% in January 2019 to 2.99 months from 2.7 months a year ago.
St Louis City and County (combined) Months Supply – Single Family Residential Listings
Source: MARIS
St Charles County…
The supply of homes for sale has decreased 5.0% in January 2019 to 2.81 months from 2.96 months a year ago.
St Charles County Months Supply – Single Family Residential Listings
Source: MARIS
Jefferson County…
The supply of homes for sale has decreased 11.9% in January 2019 to 4.24 months from 4.81 months a year ago.
Jefferson County Months Supply – Single Family Residential Listings
Source: MARIS
Franklin County…
The supply of homes for sale has increased 6.0% in January 2019 to 5.86 months from 5.53 months a year ago.
Franklin County Months Supply – Single Family Residential Listings
Source: MARIS