Economy, unsold inventory among things to watch
Hot real estate markets don't stay hot forever. In some areas around the country, the home sale market has already slowed after being robust for several years.
For years, the unsold inventory index has been used to predict which way the market and home prices were moving. The unsold inventory index reports how many months it would take to sell the existing inventory of homes for sale at the current sales pace.
Changes in the unsold inventory index are directly related to changes in supply and demand. When the demand for housing goes up, the pace at which homes sell accelerates and the existing inventory of homes for sale decreases. As inventories shrink, prices often go up as more buyers compete to buy a limited number of listings.
When demand for housing goes down, it takes longer for homes to sell. Inventories tend to rise, as does the unsold inventory index. In this sort of environment, prices may decline.
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