In real estate lingo, "months inventory" can be described as the time it would take to sell all homes on the market in a specific price range if no new homes were to come on the market.
For example, if you had 1,000 homes on the market and 100 of them had gone under contract in the past 30 days, you would have a 10-month inventory of homes (1,000 divided by 100).
As of this morning, here's what the inventory of homes looks like at different price points in the Denver MLS:
$0 - $250k... 3.54 months of inventory
$250k - $400k... 6.96 months of inventory
$400k - $600k... 10.82 months of inventory
$600k - $1M... 24.12 months of inventory
$1M - plus... 41.57 months of inventory
Most analysts say that a six month inventory of homes represents a "balanced" market. Anything above that number represents a buyer's market, below that number is a seller's market.
So what do you see with these numbers?
It's immediately apparent that the big change in our market is the rapid burn-off of foreclosure inventory at the bottom of market, while homes at higher price points are simply not moving... yet.
Not only are foreclosures dropping, but buyers and investors are now fearlessly diving into this segment of the market. I have commented repeatedly over the past few months about the intense competition for well-priced foreclosures. Both investors and first-time buyers can plainly see the benefit of owning when rental properties cashflow and mortgage payments are more affordable than rent.
Make no mistake... there is still pain in our market, and there are still more foreclosures to come. But they are no longer coming in the overwhelming numbers we have seen, and prices have reached a point where buyers have regained their courage.
If the President signs the housing bill being pushed through Congress at the moment, which includes a tax credit of up to $7,500 for first-time buyers through June of 2009, you'll see even more activity at the lower price points in our market.