Recent sales slump is good news for buyers

What may be bad news to property sellers in the Los Angeles region is good news to property buyers.

DataQuick, a San Diego-based company that monitors and reports on home sales throughout the US, said last month that sales of new and existing homes (which includes both houses and condominiums) in California has dropped dramatically.

In fact, sales across the state have fallen by nearly one-third of what they were at this time the previous year, making May 2007 the slowest month of sales in 12 years. On average, just over 48,700 homes are sold each month. In May 1995, that number was almost as low as 32,200 and this past May saw numbers closing the gap toward that record low at 36,900 homes sold.

Compare these May numbers to the selling frenzy we saw in May 2006 when over 54,000 homes were sold in that month alone.

So what does this mean for home owners?

It’s a simple lesson in “economics 101”, the law of supply and demand. Supply and prices have an inverse relationship, meaning that when there is a lot of product available, the prices are low because fewer people are buying and when supply is low, prices go up because more people are shopping for a smaller amount of product.

With home sales declining, that’s good news for buyers: more houses are available to more buyers… which means more choice and generally lower prices. If you’re in the market to find a home, this is a good time to buy.

It’s not all bad news for home sellers, though. In the same article DataQuick also pointed out that home prices have stayed steady at a median price of $484,000 per home. While home buyers may not yet find lower prices, they are sure to find a greater range of homes for sale while home sellers can remain confident that for the short term, their homes will hold their resale value.

And for home buyers, if the slump continues, then we should see housing prices fall slightly.

Home buyers: look for increased choice in the marketplace and, if the trend continues, look for home prices to be at or below where they currently are. This gives you an edge in negotiating your home purchase price and, since trends rise and fall, it’s a smart time to buy real estate since we can expect this slight downtrend to turn around in the future.

Source: http://www.dqnews.com/RRCA0607.shtm

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