MARKET STATISTICS AND YOU

Lawrence Yun, chief economist for NAR, expects a "soft" first half of this year for housing and the economy and then "notable improvement" in the second half of the year. But U.S. Treasury Secretary Henry M. Paulson Jr. noted in a recent speech that "most forecasters expect a prolonged period of adjustment" in housing.

Who's right? How can you figure out when home prices and sales in a particular neighborhood hit bottom and begin to recover ? You will need to do specific research to find the answer. Statistics provided by MLS reports are frequently misleading because they tend to lump entire counties together. A quick look at the WMR monthly Market Report will confirm just how important local statistics really are.

Most experts agree that the most important statistic is the supply, or "inventory," of homes that are for sale in a local area. The inventory of for-sale homes in a local area is usually measured as a number of months' supply at a current pace of sales. For example, last month the inventory of existing single-family detached homes for sale in Birmingham between $300-500,000 was 19.4 months, which means it would take that long to deplete the supply of for-sale homes at the current sales rate.

The general rule is that more months of supply indicates a weaker housing market. Many months suggests plenty of homes are for sale or the pace of sales is slow. Those conditions are indicative of a market that favors buyers. Few months suggests a limited number of homes for sale, or that the pace of sales is fast. Those factors are indicative of a market that favors sellers.

Beyond the actual current supply figures, the trend is even more telling. If you really want to know where the market is headed, look at both the actual supply figures and whether those numbers have been trending upward or downward over the past few quarters

Local employment trends and unemployment rates are also important indicators of local housing market conditions. Employment is important because ultimately people need a place to live, and if people are moving into an area because employment is expanding, that will be positive for homeowners.