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Here is an update to a chart I posted in March that tracked inventory based on some searches on the MLS in the local market area. The time period covered by the data is now almost a year. If you compare the left and right sides of the graph, you can see how the local market is doing compared to the same time a year ago.

These numbers are not the same as the statistics provided by VREB, which are listed month by month, they are a snapshot of inventory available at any particular time - the data does not show sales, but rather property that is listed, which has not sold yet, or which may never sell. The snapshot can also be used as a measure of how many months of inventory are sitting unsold at one time or another. The more months of inventory available, the better the choices for buyers, and the more discerning they can be about any decisions to purchase. There is less rushing in the market. There is less concern about being outbid, or losing a rare opportunity.

I believe once "months of inventory" increases past a point where inventory can be comfortably sold in one real estate season, price drops become inevitable - because a divergence between increased listing and decreased sales activity cannot continue indefinitely.

This year, the number of single family homes listed is on a similar pace to last year. The number of condos and townhouses listed is already significantly higher than this time last year. In particular, the number of townhouses for sale made a big jump of around 65%. (243 now versus around 147 a year ago). There are more condos for sale (834 versus 713), while houses are slightly less available (1136) versus a year ago (1153).

The dates for these year on year comparison stats were May 30, 2006 and May 16, 2007. Okay, so it's not quite a year. I will check again in ten days and see where things stand. If you look at the chart, it is possible to extrapolate to trends for the summer. I expect a growing glut of townhomes on the market. Townhouses used to be an affordable option for first time buyers, but at current prices, they are no longer truly affordable, and this pool of natural first time buyers is likely either in the market, or is now priced out.

Condos are selling well according to VREB stats, but there are large numbers of condos being completed in the next couple of summers. It remains to be seen whether, if inventory increases past the point where it can all be sold in a real estate season, future price drops become likely.

Single family home sales are performing reasonably well. The months of inventory available is still less than 3, despite sky high prices. If sales soften through the summer, this should start to increase.

Comments on the likely trends are welcome.