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MRI Results Reveal Now Could Be A Good Time To Sell

By Lisa Scontras

Wondering if you should sell your house now or wait?

According to John Jacobson, lead real estate analyst at Prudential Locations, the answer depends on your expectations.

“Are you waiting for willing and able buyers to come back into the market? That’s already happening,” he says. “But if you’re waiting for prices to come back to peak levels, that may take a while.”

In Hawaii, the market historically peaks every 10 years. Of course, there are no ironclad guarantees this trend will continue in the future, so if you are inclined to hold out for the next price crest, you might be waiting a long time. For those more realistic sellers looking to move up, down-size or simply cash out, the current statistics for Months of Remaining Inventory (MRI) indicate that now may be an excellent time to sell.

This key indicator of a market’s health answers the question, “How long would it take for the current number of listings to sell out at the current rate of sales?” To calculate the months of remaining inventory, you simply divide the number of active listings by the average monthly number of sales in the past year.

“MRI is a significant indicator that we track in this market, as it looks at the pace of sales and available inventory – both supply and demand,” Jacobson explains. “Currently, six to eight months of remaining inventory indicates a balanced market, meaning there is a balance between buyers and sellers, or a good supply of homes for sale to meet demand at the current rate of sales.”

More than eight months is considered a buyer’s market, as supply is increasing faster than it can be absorbed by buyers. Less than six months means supply is reduced and sales are stronger, indicating more of a seller’s market.

Overall on Oahu, the MRI is currently very low at about five months, meaning demand for homes in various neighborhoods is high. Less inventory means buyers have fewer choices available to them, which can result in multiple offers or selling prices above the asking price.

Jacobson notes that while a low MRI does carry with it a certain degree of optimism about the market, he says inventories may indeed be artificially low because of would-be sellers, who are waiting for the economy to improve before putting their homes on the market.

In addition to MRI, however, several other indicators, which are positive, also measure demand. They are:

* Sales volume or the number of sales that takes place each month.
* Days on the market, or the time it takes to sell a property.
* Sold-to-list-price ratio, which goes up and down with the strength of the market.

“Right now, in some neighborhoods, sellers are getting more than 100 percent of their list price,” he says. “That is an indication of a strong market and strong demand.”

What surprises Jacobson most about the low Months of Remaining Inventory is how it hasn’t driven prices up, as a low home supply situation generally can.

“I think that the low inventory has probably helped stabilize pricing on Oahu,” he says. “While prices in many mainland markets have dropped significantly, ours have remained relatively flat.”

“We expect prices to remain stable, but there is no guarantee that they’ll go up anytime soon,” says Jacobson. “As a long-term investment, if you wait long enough, prices will eventually go up. But if you’re looking for peak prices, you may have to wait several years.”

If you plan on selling your current home, then buying a new one, taking a look at the MRI data for your particular neighborhood can offer some valuable insight. Prudential Locations continuously tracks market conditions for every neighborhood, and this information is available by talking to any Prudential Locations agent.

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