Thursday, July 21, 2011

What is the Inventory Like

A grocer who has too many pounds of beans on the shelf lowers the price of beans in order to move the inventory.  The grocer will analyze how many pounds of beans are selling each week and compare that number to how many pounds of beans are in stock.  Based on the rate of sales if he estimates that the beans will reach their expiration date before they are all sold, the grocer will lower the price of beans to move them more quickly.

While houses don't have expiration dates excess inventory still poses a problem for the market.  If real estate agents allow the excess inventory to sit on the market for too long it becomes like a weight that pulls the prices down even deeper.  Buying consumers begin to lose confidence in buying when they see too many real estate for sale signs or, worse yet, when they see too many "price reduced" signs.  When buying consumers lose confidence they don't buy, and the problem gets worse.

If you have a market that has more than 10 months of inventory, in general, prices need to come down by 10% or more.  Inventory levels of 15 months or more may require more dramatic adjustments in price.

Be aware of your market's inventory levels and make recommendations to your sellers accordingly.

3 comments:

iand said...

It is a supply and demand relationship. The surplus of existing and newly built homes on the real estate market is putting pressure on the equity value of existing homes and the price of new homes. There are just not enough buyers. It'll take some time before the demand of buyers decreases the existing home's supply.

manila real estate

Heidi Lawrens said...

One reason why the Philippine real estates is blooming is because it is very dynamic. I could say that although there are lots of properties on sale, it doesn't take away the urge for people to buy.

course in real estate said...

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