Part II – Housing Supply is Low
While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:
1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
5-6 months’ supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.
What is happening across the country right now?
In most parts of the country, supply is dropping like a rock. According to the National Association of Realtors, total housing inventory is below a five months’ supply. This is almost 20% below inventory numbers of just a year ago and at levels we haven’t seen since 2005.
Based on the table above, we can see that the supply/demand ratio is showing a sellers’ market where prices appreciate. This has created positive movement in housing values in most parts of the country.
Sellers have a great opportunity right now. Historically, inventory increases dramatically as we approach summer. Selling now while demand is high and supply is low may garner you your best price.
Tomorrow, we will look at the competition new construction will create.