Days of Inventory....One of My Favorites Charts

Cromford Daily Observation - My favorite Tableau chart is Days of Inventory

The reason is that it packs a lot of information into just one chart and shows you the history since 2011 as well as current conditions. It is updated weekly and currently shows 57.8 days of inventory for Greater Phoenix as a whole. This excludes active listings with an existing contract (UCB or CCBS) even though they still count as active to ARMLS.

The lower the number the more the market favors sellers over buyers. 57.8 (days) is the lowest we have seen since 2012 but we got down to 42.9 then. However the 2012 number was driven down by investors and their ravenous appetite for bank-owned homes. If we filter out everything except normal transactions then we stand at 58 days, lower than any point in the last 8 years.

If you are expecting the market to weaken then watch this chart. It will have to rise much like it did in the second half of 2013. No-one knows the future for sure, but this chart will quickly indicate if the market is headed for a change.

It is always possible to find sectors of the market that are behaving differently from the rest. For example the city of Mesa stands at just 41 days, but if you restrict the chart to homes over $1 million, there are 517 days of inventory, not far below the long term average of 587. The high-end market in Mesa therefore feels nothing like the frenzied market at the low end. If we confine ourselves to homes in the sector between $175,000 and $250,000, so beloved of iBuyers and landlords, there are only 21 days of inventory, less than a third of the long term average of 68. It therefore indicates why we see strong appreciation at the low end and weak appreciation at the top.

You can conduct similar analyses for most cities round the valley. One exception to the pattern is Anthem and New River, an area which seems to be losing the plot. Here there are 108.5 days of inventory, which is above the long term average of 94 and the annual average of 100. This a distinctly negative signal, but it does seem to be ​confined to this specific area. It was down at 72 as recently as the start of 2018. This illustrates how the Days of Inventory chart reinforces the message we get from the Cromford® Market Index. Both are leading indicators.