Residential house prices are a function of supply and demand, and market conditions can be characterized by analyzing those factors. Watch the Market Action Index for sustained changes: if the index falls into the Buyer’s Market zone for a long period, prices are likely in for a downward correction. This is the state we have been in for some time now.
The Market Action Index (MAI) illustrates the balance between supply and demand using a
statistical function of the current rate of sale versus current inventory.
An MAI value greater than 30 typically indicates a “Seller's Market” (a.k.a. "Hot Market")
because demand is high enough to quickly gobble up available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a "Buyer's Market" (a.k.a. "Cold Market") where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market will typically cause prices to fall.
Until very recently, we have been charting a drop in our MAI. We are now seeing an increase in buyer activity which is pushing those numbers up over 20 in some areas. Now remember, a HOT market is when the MAI indicator hits over 30.
The CHULA VISTA market is currently quite strongly in the Buyer's Market zone (below 30). The 90-day Market Action Index stands at 19. With several months of inventory available at the
current sales rate, buyers should find ample choice. Home sales have been exceeding new inventory for several weeks. Since this is a Buyer's market prices are not yet moving higher as excess inventory is consumed. However, as the supply and demand trends continue, the market
moves into the Seller's zone, and we are likely to see upward pressure on pricing.
