I agree with SDR. In my experience (not a prediction of things to come, just what I have observed in the past), inventory peaks along with prices and then continues to rise as sales fall off. (Obviously, the less homes sell, the more the inventory will linger).
The more folks think they can “get” for their homes, the higher the percentage of those that list to test the waters. Greed is the motivating factor and I believe a lot of the listings out there are people who are late to the price run ups trying to squeeze that last dollar out of their homes (the old “darn, I should have sold yesterday” crowd).
Once a “pricing” threshold is reached and folks realize they can’t get what they “want” for their homes and they don’t sell at those lofty asking prices, inventory starts to fall off as those testing the waters simply pull their homes off the market (as opposed to inventory falling due to sales).
That’s why sales were falling off and prices were continuing to rise in some areas. Price exhaustion was being reached and now in most areas it has already has been achieved.
An inventory/pricing equilibrium will be created at some constant level of inventory and then a long period of flat sales will result, along with some price reductions from those that “have to sell.”
Then when everyone accepts the new pricing paradigm and readjusts to the cooling market, sales prices may then start to fall more rapidly because only “real” sellers will be in the market (those that must sell and if they do, inventory will decrease even more).
In my experience, folks who have to sell hate to sell in a falling market and wait to the last minute to sell because they keep hoping the market will improve.
But all that takes time (several years maybe). It won’t happen overnight and it won’t be an instantaneous crash. I would describe it as a long, hard, drawn out landing, where the market is skidding to a stop on a slippery runway.
When prices fall to a certain level (very low), inventory will also fall because many folks will refuse to sell at those “really low prices” (those that don’t have to sell anyway) and real estate will go into a holding pattern.
That was my experience of the last real estate cycle and is my experience so far of this market. Not a prediction, just an observation.
