As I’ve reported several times in the Sacramento County market, the flip side of falling prices is that more buyers start to get interested in purchasing a home.  In fact, basic economics — meaning the kind of economics I can understand — predicts this.  The law of demand and common sense tells us that if prices go up and nothing else changes, the number of purchases of a given commodity will go down.  Conversely, as prices go down, the number of purchases goes up.

Of course, the fit of unit sales to price is not perfect.  As you can see in chart below, some of the demand is seasonal.  In 2007, for example, volume rose steadily from January to July, but started to fall in August.  In 2008, however, we can see that not only was seasonal demand higher than in 2007 (217 homes selling in January of 2008 versus 161 homes sold in January of 2007), but also that the downturn in demand that happened in July of 2007 has not happened yet through August of 2008.  We may see that peak turn down in September.  We’ve already hit a peak for the year in Sacramento County.

On average so far this year, in each month we sold 28.7% more homes than at the same time last year.  Of course at the same time the average year on year decline in value each month was about 22.9%, and in August sold price per square foot was 26% from last year.