I speculated in an earlier entry that measuring monthly home sales against monthly notices of default would provide a fairly good read on the health of the housing market.
This idea is borne of the observation that excessive inventory does not by itself put much downward pressure on home prices. As long as sellers can hold out for higher prices, they can be depended upon to sit tight and do just that. Prices don’t fall substantially until too many motivated sellers — those who are forced for one reason or another to sell at whatever prices they can get — enter the market.
But how many motivated sellers is "too many?" That’s where the sales volume comes in. If must-sell properties account for just a small number of the homes being sold, the must-sellers are unlikely to have much effect on aggregate prices. But if enough transactions involve highly motivated sellers, prices could suffer.
Sales and Must-Sell Inventory
I speculated in an earlier entry that measuring monthly home sales against monthly notices of default would provide a fairly good read on the health of the housing market.
This idea is borne of the observation that excessive inventory does not by itself put much downward pressure on home prices. As long as sellers can hold out for higher prices, they can be depended upon to sit tight and do just that. Prices don’t fall substantially until too many motivated sellers — those who are forced for one reason or another to sell at whatever prices they can get — enter the market.
But how many motivated sellers is "too many?" That’s where the sales volume comes in. If must-sell properties account for just a small number of the homes being sold, the must-sellers are unlikely to have much effect on aggregate prices. But if enough transactions involve highly motivated sellers, prices could suffer.
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