Keep Your Fingers to the Pulse of Inventory Levels
The housing market is changing dramatically as we speak. Regions that virtually had no housing inventory just twelve months ago are now seeing a surge of homes coming to market. As an example, let’s look at Phoenix – one of the hardest hit markets during the housing crisis.
Last year, real estate agents in Phoenix were desperately searching for homes to satisfy the needs of their buyers. Inventory levels were as low as 1-2 months in many price ranges. Prices skyrocketed. Sellers began to place their houses up for sale to take advantage of the avalanche of buyers descending on the city. The number of active listings is up over 36% from the number last year.
However, with rising prices and increasing mortgage rates, buyers (especially investors) began to disappear. Total home sales in the MLS are down by 17.4% from last year.
Demand began to slow at the same time as supply was rapidly increasing. That dynamic will impact price movement in a big way. Agents who listed houses high hoping to take advantage of the upswing must now have difficult conversations with their sellers as price increases in the region are beginning to soften.
Phoenix will eventually be fine as sellers, buyers and agents again get comfortable with a more normal housing market.
However, we can learn from what happened in Phoenix. We must all keep close watch on the months’ inventory of homes for sale in our marketplaces in order to properly counsel our sellers on price.