Photo by Chris Bernard Courtesy of Creativecommons.org

That’s the magic question.

Wouldn’t it be nice to know when the stock market was about to rebound? Most of us would probably buy, buy, buy and watch the values rise as others say I should have purchased at those rock bottom prices! The problem here is that we never know when we hit bottom until it is often to late. Only after values rise for some time, can we then pinpoint the “bottom.”

So what indicators can we look to in an attempt to predict the “bottom”? For starters, you need to realize that real estate is a local commodity. Different areas have varying trends. Once you pinpoint a “local’ market, I suggest taking a look at the monthly listing to sale ratio. If the ratio is moving downward…in other words sales in comparison to new inventory is falling, the market is likely still moving downward. Each month there is a growing total inventory and therefore buyers can be more selective. Prices may fall as the more motivated sellers settle for less. However, if the ratio is rising this is an indication that monthly rollover inventory is depleting. Less choices for buyers will likely lead to appreciation in values. As my high school economics teacher Mr. McMacken (West Catholic ’89) would say…as supply diminishes and demand increases, prices will rise.

Here is an interesting fact about the Philadelphia listing to sale ratio. It has been on the rise each month in 2008 as reported in Trend, our local Multiple Listing Service. In January 2008, 2835 residential homes were placed on the market for sale. That same month there were 869 sales for a 30.6% listing to sale ratio. In June 2008 there were 2545 residential homes placed on the market compared to 1226 sales – a 48.2% listing to sale ratio. Now since the ratio is still below 100% there are carryover listings. But you can clearly see the increase. This is why many real estate investors are buying now in Philadelphia. They anticipate increases in value and have data to support a turnaround.

I believe that Philadelphia’s “bottom” was the first quarter of 2008. Buy now and enjoy the bargains before you look back and wish you did! Below are the actual numbers as reported in Trend. Happy Investing!

Month         Units Sold        Units Listed           Ratio

June           1225                 2545                      48.2%

May            1195                 2506                      47.7%

April           1128                 2994                     37.6%

March         1055                 2821                     37.4%

Feb              880                  2484                     35.4%

Jan               869                  2835                     30.6%