Market Saturation

From a national perspective, existing home sales decreased in July while new home sales increased during the same time frame. More important, however, is the fact that the inventory of homes on the market is at a 9.6 month supply nationally. A 6 month supply is considered appropriate during a healthy real estate market (source: Wall Street Journal 8/28/07, pg A2 and related articles).

On a local level, prices of homes on the market increased by approximately $30,000 on average from Q1 to Q2 (as of 6/30/07) in Essex County while the inventory of available homes ballooned on a level reflective of the national market as described above (source: National Association of Realtors in conjunction with MLS Property Information Network, Inc.).

The foregoing is indicative of contrasting perspectives. Builders appear to be ahead of (or at least in line with) the curve with respect to the market correction. To the extent that new homes are selling, it is because many builders are in triage mode and trying to stop the bleeding. The converse is true with respect to most homeowners who refuse to acknowledge the correction, thus contributing to the increase in inventory. The increase in average days on market due to aggressive pricing only causes confusion for buyers who lose track of inventory and have too many options to make an informed decision.

Fall-out:

If you are selling your home, paying attention to staging and distinguishing your property is more important now than at any point in the last few years. Buyer statements such as "I already saw this property" are commonplace. Placing a property on the market prematurely - or without making necessary repairs or upgrades - will likely have devastating consequences in relation to the selling price.

With the above in mind, if you are a buyer, look for properties that do not present well, but meet your general requirements as to lay out, square footage, etc. Given the glut of inventory, these homes will languish on the market. With a little elbow grease, you could end up with a steal in the months to come.