Perhaps the most fundamental element of a healthy real estate market is the number of home sales compared to the number of homes listed. The idea is simple supply and demand. If there are very few homes for sale and many buyers trying to purchase a home, the competing buyers result in paying more for homes than they would otherwise. Conversely, if there is a huge surplus of homes for sale and very few people looking to buy, home values will go down.
So where do things stand as far as supply and demand in the Big Bear real estate market? Take a look...
As you can see from the blue line, which is referenced by the numbers on the left-hand side of the graph, the number of Big Bear homes for sale has fallen fairly consistently over the past few years. In fact, since almost two years ago, we have seen home inventory fall by more than 50%.
As far as sales, represented by the red line and the numbers on the right, during the same two year period we are seeing sales rise. Compared to two years ago, sales are up almost 50%.
With sales increasing and inventory decreasing, the Big Bear real estate market is in an improving condition.
A popular way to express the strength of a market is by expressing home inventory in terms of "months of inventory".
This number is expressed by dividing the number of home sales each month by the number of listings. For instance, if there were 100 listings one month and 20 sales that same month, we would say there was a 5 month inventory of homes for sale. In essence, if no more listings were to come on the market, at the current pace of sales, there would be no more homes left on the market after 5 months.
In a balanced market, there is usually around 6 months of home inventory.
Take a look at a short history of month's inventory...
You can see over the last two years how we've gone from over 13 months of inventory to just 4 months inventory. Relative to the 6 months of inventory being seen as a balanced market, you can see that where we currently stand favors the sellers and thus rising home prices.
With the supply side low and the demand side high right now in the Big Bear real estate market, I am optimistic we will continue to see home prices rise into the foreseeable future!