Where’s the existing inventory? …not below $400,000

Frequent readers of this blog are aware of the inventory shortage that our local market is experiencing. For months now my monthly market reports have stated that the months-supply-of-inventory (MSI) stands at less than 2 months-supply — characterizing this market as an extreme Seller’s market.

But we also know that the inventory shortage does not exist across all price points. For example, there are numerous million-dollar properties that have been sitting on the market for some time. So how does the inventory supply break out across price bands? In todays post I’ll show you.

My methodology is as follows:

1. Calculate the monthly rate of sales at each price band. For this exercise, I used price bands in $100,000 increments. To calculate the number of sales per month, I found the number of sales for a three-month period (August 2012 through October 2012) and then divided by three.
2. Determine the current active and available inventory at each price band.
3. Divide the number of available listings by the monthly number of sales to determine MSI.

The results follow in the table below…

As can be seen in the table above, although the Reno-Sparks market as a whole currently has only 1.45 months supply of inventory, breaking the market’s inventory down by price bands tells different stories. A “balanced” housing market (i.e. neither a Sellers market, nor Buyers market) is typically characterized by 4 – 6 months supply of inventory. The table above shows a balanced market in only the $400,000 to $700,000 price range. Above $700,000 the market turns to an extreme Buyer’s Market – with two years of inventory at $800,000 to $1,000,000; and over five years of inventory at the over $1M price point.

Conversely, at the lower price bands, existing inventory can be measured in weeks rather than months. For example, at the under-$100,000 level we see about a weeks supply of inventory; two weeks at the $100K – $200K range; six weeks at the $200K – $300K range; and eight weeks at the $300K – $400K range.

Note: The reported in the table above covers the cities of Reno, Nevada and Sparks, Nevada [NNRMLS Area #100]. Residential data includes Site/Stick Built properties only. Data excludes Condo/Townhouse, Manufactured/Modular and Shared Ownership properties. Data courtesy of the Northern Nevada Regional MLS – November 2012. Note: This information is deemed reliable, but not guaranteed.