Consumers » What Makes a Healthy Market

What Makes a Healthy Market?

Inventory
How many months worth of inventory are available? That is, given the current pace, how long would it take to sell every home on the market? In markets with less than 6.5 months of inventory, homes are appreciating faster than inflation. Anything over nine or 10 months creates a buyer’s market. Compare the current data with previous quarters to see whether the market is trending upward or downward. The current inventory level in Memphis is between a 10 and 11 months’ supply. This graph shows the change in active listings and months' supply since 2002.

Local economy and job growth
Corporate giants and industry up-and-comers continue to relocate or headquarter in Memphis, meaning a steady growth in middle class and professional job opportunities. The job market and economy are diverse and not dependent upon a single industry to carry it, unlike Detroit, for instance, where a downturn in a single industry can shake the housing market to the core.  From 2006 to 2007, employment in Memphis grew .83% - on par with the national average for the same period.

Interest rates remain low
Historically speaking, interest rates remain at or near all-time lows, making home ownership more affordable. This graph shows how mortgage rates have changed since 1972.

Sustainable housing value appreciation
Memphis has seen a slow and sustainable appreciation in real estate values over the years, unlike some larger markets (many of which are on the East and West coasts), where values have spiked – and therefore, fallen – quickly.  So while sales prices have declined in Memphis, those declines have been much smaller percentage wise as compared to other markets and should be quicker to recover. Some other points to consider:

• PMI Mortgage Insurance Co. consistently ranks Memphis as one of the markets least at risk for overall declines in home values in its quarterly Economic Real Estate Trends report.
• Over the past decade, the Memphis-area housing market has experienced a 37% increase in average home sales prices.

Affordability
Memphis remains one of the nation’s most affordable places to live.

• The average price of homes sold in our market in 2007 was $171,000 compared to $218,900 for the nation.
• Housing in Memphis is considered "undervalued" by 14% based on our local economy and job market according to a Housing Valuation Analysis conducted by National City Corp.
• PMI Mortgage Insurance Co. consistently ranks Memphis as one of the most affordable markets in its quarterly Economic Real Estate Trends report.