Supply and Demand
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The easiest way to analyze any market is to look at supply and demand. Right now in the Twin Cities, supplies are certainly higher than they were last year at this time. Sept 2006 supply/demand ratio was around 8.3, this year it was 12.2 in September. The good news is that projected November ratio is 11.2, meaning that sales are starting to clear out some of the backed up inventory.
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Falling mortgage rates are another strong sign for Twin Cities Real Estate. With cheaper money available to finance low risk buyers and the end of the artificial inflation of the market by cheap subprime loans, market balance arrives naturally.
The Supply-Demand Ratio is calculated by comparing the number of homes for sale at the beginning of each month with the number of total pending sales for the month. The higher the Supply-Demand Ratio, the more supply there is relative to demand.