In the last few days, the press has been really digging into the real estate market. Recently released figures for July 2010 sales indicated a sharp decline in properties sold that month. Why is this a surprise? Everyone knew the tax credit deadline was behind the surge in June closings. The real question is whether, going forward, the post-tax-credit housing market is heading toward collapse or whether we're going to see a return to equilibrium.
To answer that question, we took a look at market activity in Cambridge, Mass. Two things stand out. First, although the tax credit did stimulate a good deal of activity this Spring, post-tax-credit July 2010 in Cambridge represents a return to our normal market dynamic rather than a nose dive. (See graph below) In fact there's been a slight but noted increase: in July 2009 we had 84 properties go under agreement; in July 2010 the figure went up to 86. Contrary to the generalizations being made about the national market, here in Cambridge we are not seeing a dramatic decline in activity nor do the statistics indicate this kind of trend for the future.
Secondly, it's being reported that, post-tax-credit, many parts of the country are seeing inventory levels jump to 12 months of inventory or higher. What does this mean? Basically, given the current stock of houses for sale and the current level of buyer activity, it will take over 12 months to sell all the inventory in those troubled markets. Six months of inventory is considered a healthy, neutral level of inventory to be at. In Cambridge, we've been doing better than average (See graph below): our inventory levels in July 2010 were at 4.3 months. The month before, June 2010, we were at 4.1. months, so the end of the tax credit clearly hasn't triggered stagnation in our market. In fact, ever since March, the beginning of our Spring market, our inventory has consistently hovered around 4 months.
These are just two ways that the situation in Cambridge differs dramatically from the doom and gloom reports making the rounds in the media over the last few days.