Contributor - Chris Heagerty, Director –Communication, Professional and Business Development


Defining Normal


Normal: standard, usual, level The question on everyone’s mind: When will the market get back to normal?


Defining a “normal” real estate market is complex, but worth consideration. Perhaps an appropriate guide- line is the supply and demand balance through the months supply of inventory metric (MSI), making the as- sumption that a balanced market is at least a “normal” worth striving for. MSI is calculated by dividing the total active properties by the number of sold properties for a given month. MSI greater than 6 months is typi- cally indicative of a Buyer’s market, which places negative pressure on pricing. MSI below 4 is usually consid- ered a Seller’s market, which exerts upward pressure on pricing. MSI between 4 and 6 months represents a balanced market where the opposing forces of supply and demand are close to equilibrium.


ARMLS examined MSIs for single family residential properties since 2002. (Complete data for 2000 and 2001 are not available.) In examining market balance from 2002 to 2010, the 2002 and 2003 markets were bal- anced with MSIs of 5.23 and 4.29 respectively. The 2004-2005 MSIs reflect the boom years, characterized by limited supply and voracious buyer appetite for property. It was during these years with MSIs of 2.25 and 1.7 that pricing in the Valley soared.


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