Alpharetta Market Sales Down, Prices Relatively Constant - What Happens Next?

When sales volume goes down and inventory stays the same, what happens to prices? This would be something like Economics .101 - A Middle School/High School level economics question. The answer should be obvious - over time, prices will fall setting in motion a series of events which ultimately will bring inventories back in line with sales volume as the pendulum swings in the other direction. It makes sense, but, it's not what we see hapening in Alpharetta and some other areas of North Fulton. It may mean however that prices will fall, but, conventional wisdom would leave me to believe that it would have alread been happening. This first chart shows the decline in sales volume for Alpharetta:

Sales Volume in Alpharetta 2007 vs. 2008

The second chart here shows the sales prices from 2007 to 2008 and if you look closely at the chart, there really isn't anything indicating a drop in prices:

Sales Prices for Alpharetta 2007 vs. 2008

Outside of the price change in October of 2008, there is nothing to indicate that prices are falling and no, a one month decline like that is not enough to draw any conclusions whatsoever. If we see three months of year-to-year sales drops then we will have a trend.

What Happens Next? 

I am of the opinion, personally, that there is absolutely nothing that can be done to increase sales volumes to 2006 and 2007 levels short of reinstating subprime loans and I wouldn't wish that on anyone or any real estate market. It is one of the leading causes of why we are where we are right now. Lower interest rates could help, but, not enough to increase sales volume back to pre-slowdown numbers. There aren't really very many variables that can change; sales volume, prices and inventory along with the local and national economy. Each of these has a subset of variables that can affect any and all of them. So which of these variables is likely to change in the near future?

Sales volume? I don't think so. Like I said, lower rates will help some, but, we cannot replace the number of loans available compared with how many were available while we had the subprime loans simply by lowering interest rates. So there isn't anything that will shake up this variable.

Prices? For many of us actively selling real estate right now, it's apparent that the majority of buyers do not see value at the current prices. This is helping to keep volume down. Many people who would sell simply do not have the equity to sell at the current prices it would take to sell there home. There is a real chance that we will see prices go down, but, as of right now, it hasn't happened. Lower prices could increase sales volume reducing inventory, but, at what cost to more homeowners if prices go down?

Inventory? How does inventory drop if sales volume is down? Either less people list their homes (not likely), prices drop or more loans become available. None of which is happening right now.

Alpharetta homes for sale have been affected less by the slowdown than many other areas, but I'm not sure that it can be sustained forever. With a local, state and national economy all in a recession and consumer confidence very low, we need either time or some yet to be seen market force enter into the equation if the market is to return to a more balanced state any earlier than 2010.