The number of months of inventory in Newport Beach jumped 42% from 2007 to 2008. This means that in 2008 there was either more inventory at the same pace of sales or a slower pace of sales with the same inventory, or a combination of the two. Higher inventory levels combined with slower sales usually means lower prices. The biggest area of price pressure coming in to 2009 will likely be at the $4M+ price levels given the elevated months of inventory: 37 months ($5M+) and 18 months ($4-$4.999M) vs. 13.9 months (Newport Beach as a whole). Interestingly, the months of inventory in the $2M – $4M range remained fairly steady from 2006 to 2008 suggesting a somewhat more resilient market to date in this price range. The $1.25M-$1.999M market had relatively greater increases in months of inventory, reflecting a stronger buyer’s market in this range.
The number of months of inventory is a traditional measure of the extent to which a market is a Seller’s Market, Neutral Market, or Buyer’s Market. In general, three months or less of inventory suggests a Seller’s Market; 3-6 months a Neutral Market; and 6 or more months a Buyer’s Market.
See chart and table below.
Market Activity Index = Months of Inventory
Market Activity Index - Newport Beach (provided in tabular form)
By Price Level in $Millions
| 2006 | 2007 | 2008 | ||
| TOTAL | 8.3 | 9.8 | 13.9 | |
| <$1 | 6.5 | 8.2 | 10.3 | |
| $1-1.249 | 8 | 10.1 | 9.4 | |
| $1.25-1.499 | 9.5 | 12.9 | 15.6 | |
| $1.5-1.999 | 8.9 | 8.3 | 18.8 | |
| $2-2.499 | 8.7 | 12.6 | 13.9 | |
| $2.5-2999 | 10.5 | 11 | 13 | |
| $3-3.999 | 11.6 | 11 | 13.6 | |
| $4-4.999 | 6.2 | 7.5 | 18 | |
| $5+ | 10.6 | 11.5 | 36.8 | |
This report is based on data supplied by the SoCal, Sandicor, MRMLS, and DARMLS or their MLSs. Neither the Associations nor their MLSs guarantee or are in anyway responsible for their accuracy. Data maintained by the Associations or their MLSs may not reflect all real estate activities in the market. Information deemed reliable but not guaranteed. COPYRIGHT © Bankers Funding Company.
Buyers and sellers alike should take a look at months of inventory as an important input into determining a fair market price for a given property. The Market Activity Index can be instrumental in assessing market conditions that are likely to affect future pricing. Armed with this information, buyers can determine an offer price that is reflective of the market and be better able to convince sellers of the reasonableness of their offer. Similarly, sellers can use this measure to price their properties appropriately and avoid the all too common scenario of chasing the market down rather than pricing in advance of the market and ultimately realizing a higher price.
For specific questions or further analysis of the Newport Beach market or any other market in Southern California, including specific price ranges, please contact me at 949-701-2000 or albierogers@firstteam.com.
