In two prior postings I have pointed out how various methods of measuring market value and activity just dont cut it in todays real estate market.  The AVMs are often hopelessly out of date, often based on tax assessments and comparison to comparable properties that in many cases simply arent comparable.  The absorption rate method of assessing a market is interesting, but in most cases is used in too small an area to be useful.

Supply/Demand ratios offer another way of looking at a market.  This is a sort of variation on the absorption rate, but based on real estate activity, not inventory.  It is more dynamic.  Supply/demand is the ratio between sales made (properties put under contract, not necessarily closed yet) and listings taken (which could be under contract or even sold) in a given month.  If 100 listings are taken, and 100 properties sold, the S/D ratio is 100%.  This is a high-velocity market.  Yet, if there are still 600 properties available for sale, there is a six-month supply – not exactly a hot market, but the activity says otherwise.  However, as in the aphorism one swallow doesnt make a spring, one good month doesnt make a spring (market).  If this kind of activity persists for several months, then further investigation is warranted, if inventory stays high.

So, supply/demand ratios provide interesting insight in a single month, but displays the dynamism of only that month.  By itself, S/D does not help in determining a lot about the market, except for that month.

So what's the answer?  I'll tell you - soon.