• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

  • About
  • Appraisals
  • Order
  • Ask Ryan
  • Areas
  • Classes
  • Press
  • Trends
  • Share
  • Contact

how to calculate inventory

4 reasons why housing inventory is low in Sacramento

May 6, 2014 By Ryan Lundquist 1 Comment

Why is housing inventory so low right now? Did you know it declined again this past month? Shouldn’t there be more homes on the market? I’ve been getting asked these questions quite a bit, so I wanted to take a stab at an answer. First, let’s remember that housing inventory is a metric to help tell the story of how many houses are for sale. Let’s get refreshed on how to calculate this figure and then consider a few conversation points for clients.

How to calculate monthly inventory - by sacramento appraisal blog - 530

Understanding how inventory is calculated is key to understanding why inventory is low in the Sacramento area right now. In the example above inventory is 1.97 months, which means in March there were 1.97 months worth of houses for sale on the market. Right now inventory is closer to 1.85 months, but I’ll get to that in a post on Thursday.

Four Talking Points about Housing Inventory:

  1. Normal: It is normal for inventory to become thin during this time of year because of the regular cycle of real estate. As Spring unfolds, more buyers get into contract, and this effectively reduces the percentage of active listings to sales from MLS. This is important to know because if there are less active listings compared to sales, inventory is bound to decline since it is calculated by dividing active listings by sales.
  2. 10% More Listings: For context, there are actually 10% more active listings right now compared with last month, yet inventory will show a decline in Sacramento County since the number of sales and pendings has been showing an increase. As real estate “Spring fever” comes into play, the growth of sales and pendings can outweigh the growth of new listings, which is why on paper inventory can show a decline despite more listings actually hitting the market.
  3. The Pending Factor: Pending sales are not counted when calculating housing inventory because these properties are no longer available for buyers. Remember, inventory is a metric to help tell the story of how many houses are for sale on the market rather than ones that are already spoken for (pendings). The number of pending sales in MLS has grown substantially in Sacramento County since January (which is normal), though this year the percentage of pendings to sales is a bit higher than usual. This naturally makes inventory decline since pendings are not factored into housing supply. When we look at the numbers, there are over 2600 active listings in Sacramento County right now, but there are roughly the same number of pending sales. The interesting part is despite having a high volume of pendings for the past few months, sales volume has been sluggish, which is why over time we’ll need to see more pending sales close escrow. Let’s watch these next two quarters closely to see if sales volume gains substantial momentum to make up for a slow Winter or if this sluggish trend persists.
  4. Bonus #4: Let me put this out there. Some home owners have an incredibly low interest rate because of how low rates were over the past two years. This has surely deterred certain owners from selling. Why? Because home owners always have to consider the price of a replacement home that will now cost more to buy since homes and loans are now more expensive. This is doubtfully driving the market, but we should nonetheless consider this as part of the reason why inventory is lower.

Question: Are you finding some home owners hesitant to list their properties? Are there enough listings for your buyers right now? Has it been easier or more challenging to to get into contract lately?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Share:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Filed Under: Resources Tagged With: Appraiser, appraisers in Sacramento, equation for inventory, housing inventory, how to calculate inventory, inventory, less sales, listings, months of housing supply, Sacramento Real Estate, sluggish sales

Primary Sidebar

Connect with Ryan

 Facebook Twitter LinkedIn YouTube Instagram

Subscribe to Weekly Post

* indicates required

Search this site

Blog Categories

  • Appraisal Stuff (407)
  • Bankruptcy (3)
  • Divorce (4)
  • Estate Settlement (6)
  • FHA Appraisal Articles (56)
  • Internet (53)
  • Market Trends (482)
  • Photos from the Field (126)
  • Property Taxes (70)
  • Random Stuff (231)
  • Resources (566)
  • Videos (161)

Blog Archives: 2009 – 2021

Lundquist Appraisal Links

  • Appraisal Order Form
  • Appraisal Website
  • Rancho Cordova Appraiser Website
  • Sacramento Appraisal Blog Sitemap
  • Sacramento Real Estate Appraiser Facebook Page
  • Twitter: Sacramento Appraiser (@SacAppraiser)
  • YouTube: Sacramento Appraiser Channel

Most Recent Posts

  • How much have prices risen since the bottom of the market?
  • How long can this market keep going?
  • What is your housing persona?
  • Rapid price growth & the Gilmore Girls next door
  • Are first-time buyers targeting 2-4 unit properties?
  • Stale real estate headlines & buyers flocking to El Dorado County
  • My new sewer line adds huge value, right?
  • The housing market nobody predicted
  • Real estate trends to watch in 2021
  • You carried me & a spreadsheet for Christmas

Disclaimer

First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

Please see my Sharing Policy on the navigation bar if you are interested in sharing portions of any content on this blog.

The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

There are no affiliate links on this blog, but there are three advertisements. Please do your homework before doing business with any advertisers as advertisements are not affiliated with this blog in any way. Two ads are located on the sidebar and one is at the bottom of each post. The ads earn a minor amount of revenue and are a simple reward for providing consistent original content to readers. If you think the ads interfere with your blog experience or the integrity of the blog somehow, let me know. I'm always open to feedback. Thank you again for being here.

Copyright © 2021 Sacramento Appraisal Blog