Evidence to the contrary

Evidence to the contrary

The residential real estate market tends to drive how commercial investment is made. When you have improving residential markets, you typically have improving commercial markets.

I studied the residential market from July 2007 through June 2009 to determine how sales activity was taking place. The study was based on sales reported to the Greater Baton Rouge Multiple Listing Service.

While the MLS does not encompass all sales, it’s a relatively strong representative sample of about 60% of the total market. Sales were studied from July 2007 to June 2008, and then compared to sales from July 2008 to June 2009.

My conversations with local Realtors typically include statements like, “Things are slow, but they seem to be improving.” The statistical data is contrary to that opinion.

The residential market appears to remain relatively soft. The bright spot, however, is that inventories are declining, and we appear to be absorbing it. The months of inventory, although increasing in many categories, is strongly dependent on the rate of sales.

An increase in the sales rate would dramatically decrease the months of inventory, because the number of homes available for sale has been decreasing over the past 12 months. Months of inventory is directly related to the rate of sales; because the rate of sales is slow, the months of inventory is increasing even though the current inventory has decreased.

That said, it does not appear the residential market has improved over the past 12 months. According to the MLS data, it remains in decline and has not begun to recover.

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