Real estate market is stabilizing

Despite all the bad news bombarding people in November and December, sales of existing homes did better than expected. And thanks to a faster pace of sales, lower home prices, and lower financing costs, the inventory of unsold homes on the market has dropped back to levels not seen for the past 18 months (see chart). This is a picture of a market that is fixing itself. I know that many worry about another avalanche of foreclosed properties being dumped on the market and depressing things further, but to date the evidence tells me that prices are adjusting and this is allowing the market to clear. So even if more homes hit the market, there will likely be buyers ready to scoop them up. Anything can be sold if the price is right; problems occur when sellers refuse to accept that their home is worth less than they think it's worth. It's taken a little over three years, but the market is finding the price that will move the inventory of homes. Meanwhile, builders have cut the construction of new homes to extremely low levels, and that is helping the situation as well.