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This graph measures the relationship between active and pending listings. As described in Statistics 2006, this is a good way to measure the overall health of the marketplace. When we compare over time we can see the trend of healthy, or unhealthy market. 

If the trend breaks higher, that's when the market is heading for trouble - the active listings would be overwhelming the new pendings. 

If it breaks to the downside, it means the pendings are outpacing the new listings coming on, a healthy pick-up in the market place. 

In the years 2000-2004, the Jim ratio was typically 2:1 to 3:1.

Here's the same graph, with a couple of months of 2007 tacked on:

Pure numbers here - San Diego County monthly sales.

(updated through May 2007)

New graph through July 2007:

Could there be an invisible decline in the marketplace?  If prices stay flat, but you can buy more house, then conceivably you wouldn't see the change if you only watched the median or average sales price.

Another typical graph of the last three years  - the line goes practically straight up until June/July 2004, then the trend hangs a right turn. 

Can we live with a flat market? Yes, we have been living in flatsville for almost two years now.

You might say this is the making of the perfect bell curve, and look out below.

It's likely to end up somewhere in between. I think we'll see an increasing pool of motivated sellers every month - but will there be enough buyers to gobble up the "deals"?   

And then what happens if/when an area has a few "under-market" sales? They become the comps for the next sale unless there are others that close higher - which isn't too likely, how many people are going to want to pay retail when they see houses selling at wholesale down the street?

The future market will be very discriminating - buyers are going to hold out for the easy decisions.  They'll buy when it's easy and comfortable.  Have a great-looking newer house in a coveted location?  They'll buy that one if the price is right.  Have a house with a few bumps and bruises? or not such a great location? No way - too easy to stay on the fence - unless the price is really attractive.

I think the market will be scattered all over the map, from now on.  There will be a mix of higher sales of prime properties, combined with lower sales of the not-so-nice houses.

It'll get harder and harder for buyers to make the decisions, and many will decide to wait until it's easier.

Study this graph for # of sales in Souhtern California over the last three years, and consider these facts: 

1. Available financing hasn't changed.

2. Interest rates haven't moved much.

3. Prices have been pretty steady the last 18 months.

The movements in these lines are remarkably similar.  How can a community of 10 million people, with all the participants being different each month, selling different houses each month, have such a similar reaction between the counties?

There isn't anything logical that can explain why the lines move in concert together, at least that I can think of - how about you?

And how do you explain how the market just dropped like a rock recently, in every county, when money, rates, and prices haven't changed much at all? 

The fundamentals have been out of whack for years, it's not that.

There is a lot of emotional/psychological elements to buying and selling houses, and I think the reason these lines move so similarly must have something to do with the community 'psyche', but who knows?

Who really knows what will happen from here? I'd be interested to hear your thoughts.

(special thanks to themessthatgreenspanmade.blogspot.com where I found this chart)