Months of Inventory is a pretty standard measure of the market. It is simply total inventory at a given time (usually month end) divided by total sales for month. 1,000 active listings and 250 sales = 4 months worth of inventory.
I get a daily equities market watch email from Weiss Research in the States, and of course the housing market is almost daily fodder. In today’s issue, along with words like “pig” and “lipstick”, were some hard numbers. Total sales down 8.4%, seasonally adjusted to 6.12%, single biggest monthly decline in 18 years. Prices are also down. YOY is only 0.3%, but that’s the 8th drop in a row – “…the longest losing streak on record”. Supply is still huge – 17% higher than last year.
Which is where MOI comes in. Those numbers render an MOI of 7.3, just shy of the high for this cycle of 7.4, reached last October. Remember, those are US numbers, not Vancouver numbers.
Where do we stand as of March 31? 12,452 active listings and 3,744 sales gives an MOI of 3.32. Last March we were at 10,625 and 4,199, or 2.53. 2.53 is obviously a hot market. 3.32 is strong. 7.4 is tough. I’m pretty certain I remember MOIs of 9+.
What would we need to reach an MOI of 5? If sales and prices stayed constant we’d need a climb in inventory to 18,720. If sales volume drops 25%, however, to 2,808, we’d only need inventory of 14,000. That’s close to a 20% increase in inventory combined with a 25% drop in sales. I’m not saying it can’t happen, but I think its fair to say we’re still a a ways off that right now. I think that current prices can probably be sustained, if everything else remains equal, which is the same as saying we’ll need something quite new to make prices drop. Is psychology enough? Is new supply of condos enough to effect the wider market? Should we be worried about something else?