It's been a mantra of Realtors for years that as inventory shrinks, prices will rise. Locally and nationally, inventory has dropped--but this isn't a positive sign. Last Fall, as inventory declined, the Charlottesville Area Association of Realtors Q3 report stated:
"This continual float down of active inventory represents progress toward what is considered a balanced, neither buyer's nor seller's advantaged, market..." [emphasis ours]No. This area remains a "buyer's market" and prices will continue to decline through 2012 and beyond. The CAAR was relying on the old paradigm and missed the big picture. This blog laid out six reasons the decline in inventory was not positive. The HooK picked up the story. The WSJ highlighted the issue, too. And by the end of the year, the local decline in inventory was 20% lower than 2010.
Now RE appraiser/analyst Jonathan Miller highlights the national inventory decline in the article embedded below.
Local and national inventory declines have been due to lack of sellers, and due to the foreclosure moratorium. Local sales are hovering at levels from the 1990's, despite thousands of new units built since then. So next time somebody mentions "lower inventory" as a "positive" or "progress," look behind the numbers. Make sure it's not just an outmoded mantra from a real estate reality that may never exist again.
And just as inventory decline is highlighted in the national media, we're at the turning point in the year: it's Spring Selling Season. Check out the daily rise, sometimes in the double digits, here. In 2012, foreclosures will surge drastically. Short sales are about to increase too, everywhere.