A traditional method to determine if the Honolulu real estate market favors the buyer or seller is to look at the number of months of inventory remaining. A conventional thumb rule states that if the number of months of inventory remaining is greater than 6, we’re in a buyer’s market. Less than 6 is a seller’s market.
What is the number of months of inventory remaining? Simply put, it is a measure of how long it will take to sell all real estate currently on the market in a particular category. Examples of categories include: Oahu Single Family Homes priced above $1 million, Condos in East Oahu, Ko’olani condos, etc. The months of inventory calculation is straight forward: number of homes for sale divided by the number of sales in a given month.
Examples (using Dec 2008 and 2009 sales)
1. Oahu Single Family Homes priced above $1 million
2008 – 554 homes for sale divided by 21 sales = 26.4 months of inventory
2009 – 329 homes for sale divided by 31 sales = 10.6 months of inventory
2. Condos in East Oahu
2008 – 234 condos for sale divided by 14 sales = 16.7 months of inventory
2009 – 112 condos for sale divided by 30 sales = 3.7 months of inventory
3. Ko’olani condos (1177 Queen Street in Kakaako)
2008 – 27 condos for sale divided by 4 sales = 6.8 months of inventory
2009 – 15 condos for sale divided by 3 sales = 5.0 months of inventory
The attached Months of Inventory Remaining PDF file shows the inventory remaining for several categories of Oahu single family homes and Honolulu condos for sale. You can see that the months of inventory remaining fell dramatically in 2009, indicating buyers have less to choose from and therefore, less power in the marketplace.
Contributed by Michael Zimmerman
Direct: 808-457-9683
Michael@Michael-Zimmerman.com
www.Michael-Zimmerman.com
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