How Can Real Estate Inventory Be Up & Down at the Same Time?

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young couple looking lost and confused

That question probably sounds like one of those brain teasers like “How can Joe be Tom’s father and also his grandson?” – but it isn’t.

I’ve written before about how you can look at overall numbers for the country or for a state, city or county but that real estate is local and can be doing well in one area and not as well in another not too far away from the first.

The same can be true of inventory levels but what I’m referring to here doesn’t have to do with comparing locations but rather price ranges.

The biggest inventory problem right now is in the price range for lower to mid-range priced properties and especially the price range for first-time buyers and ‘starter’ homes.

There were 2 recent articles I read which went over this phenomenon we are seeing that were titled “Entry Level Home Prices Continue to Climb” and “First Time Homebuyers Facing Backlash of Improving Housing Market”. Both of these articles have described how the luxury market is starting to show signs of slowing down while properties in the lower 1/3 of the price ranges are far and few between and are the most fought over ones.

Here are the key takeaways from these articles:

  • “First-time homebuyers in the bottom-third price tier are seeing more competition and harder entry into home purchasing.
  • Zillow’s data shows that luxury homes are seeing more price cuts, while some entry-level homes are being sold over asking price.
  • Miami is the only market where inventory levels are increasing across the board.”

I noticed this phenomenon but hadn’t really checked to see how much of a difference there was in the inventory levels of residential properties above $500,000 and below $500,000 and it was quite a marked difference.

The months inventory for all residential properties in Pinellas County was 2.49 months.  When separated into homes above and below $500K, the inventory level for those priced under $500K was 1.99 months and for homes over $500K it was 6.49.  That’s a pretty noticeable difference as you can see on the chart below.

So when you hear about the sales slowing down, what is currently happening is that higher end home sales are slowing down which gives an overall appearance of a slowdown while at the same time the homes priced in the lower 1/3 tier are still selling very fast.

As a buyer, that means you need to know how to approach the current seller’s market if you want to have any chance at getting what you want.  As a seller, you need to find out which tier of pricing you are in and have a proper pricing and marketing strategy that is appropriate for your home.  I will be happy to help you with either of these – just send me an email or give me a call!


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