As I have mentioned many times before, the laws of supply and demand are what governs price appreciation in almost all markets, real estate not being an exception. In the Big Bear real estate market, we are continuing to see demand stay strong from homebuyers while the supply of homes for sale has stayed relatively low. 

One way in which we express these conditions in the real estate world is in terms of "month of inventory". This measure is simply derived by dividing the number of current listings by the number of sales in the most recent month. For instance, there was an average of 510 homes for sale in Big Bear in August while there were 138 home sales. When you divide these numbers, you get 3.7 months of inventory.

In a normal market, you will see about 6 months of inventory. Take a look at the graph below to see how home inventory has decreased over the past few years.

Big Bear home inventory 

This August's 3.7 months of inventory is lower than last August's 4.3 months of inventory, which is far lower than 2011's 8.5 months of inventory. As demand increases and supply wains, prices will almost always increase as there is competition to purchase what few homes are on the market. With 6 months of inventory being the norm, at the current 3.7 months of inventory, sellers have a decided advantage in today's market.

There has been speculation that this recent improvement in the real estate market will slow down. This is based on interest rates rising over a full percentage point in the last few months resulting in the affordability index showing that fewer people can afford to buy a home. If you look at the number or pending sales in the Big Bear real estate market, there is no sign of a slowdown yet. 

So for the time being, it looks like demand is still high and listings are low, which means homes should continue to appreciate at least throughout 2013.