An article on CNN Money the other day got us thinking about the overall health of the San Francisco real estate market. Sure, prices are down. No market has been immune to the country’s economic downturn. But some have been hit with a cold while others are bedridden with pneumonia.
The article mentioned above talks about the Miami real estate market. Some tidbits:
- There are 13,200 homes for sale in Miami right now.
- There are 21,600 condos for sale in Miami right now.
We’re not alarmed by these numbers… after all, Miami is a very different market than San Francisco and comparing the two is not exactly “apples to apples”. However, there is a way we can normalize data between the two markets to control for the differences. We can accomplish this by looking at MSI, or months supply of inventory. We’ve written about this metric before. Basically, months supply of inventory is a measure of how many months it would take to sell off all of today’s inventory (active listings) if new listings ceased coming on the market immediately. It is calculated by taking the total active listings in a market and dividing it by the number of homes under contract. For example, lets say there are 10 condos for sale in a market and 5 have gone into contract during the current month. This market has just 2 months supply of inventory, which is pretty hot.
Markets that have 0-3 months supply of inventory are considered hot. 3-6 months is in balance, 6-9 months is cool, and 9 or more months is cold.
When we compare Miami to San Francisco, here’s what we currently see:
- Miami currently has a 52-month glut, I, I mean, supply of condos. That means it would take over 4 years for all of today’s active condo listings to sell if new units stopped coming on the market immediately. Add to that shadow inventory, foreclosures (which are a huge problem there) and pocket listings and… Holy toledo!! Ok, now we’re alarmed.
- San Francisco, according to the highly respected real estate analysis company Terradatum, has Read the rest of this entry ?