Home Inventory is Driving Prices

Posted on: May 19, 2013

The housing market has always been subject to supply and demand economics, and the current housing market upswing is a great example of how important these factors can be. In today’s housing market, real estate sales in many parts of the country are increasing – which has led to changes in inventory that affect pricing. How does housing market inventory drive pricing? Here’s what you need to know:


Inventory Down, Prices Up

With the spring market well underway, home inventory is less than “healthy” in many parts of the country, driving price increases. A “healthy” home inventory is considered roughly a 6 month supply; in many parts of the country, the real estate market currently only boasts a 3 to 4.5 month supply. Homes are in such high demand in some places that they’re being sold even before they make it onto MLS. This supply shortfall, combined with increased demand as the market recovers and interest rates remain favorable, has led to price increases.


This is particularly true of homes under $250,000, which is the key price range for first-time buyers and investors – the two demographics that are driving the housing market recovery. Most buyers are looking for homes in this price range, and there are a limited supply of them. This has resulted in multiple offers and escalating bids. This inventory shortage is great news for sellers, many of whom are finding themselves meeting their asking price – or even higher as bidding wars drive prices up. But buyers are finding themselves paying more, and being forced to snap up properties quickly before they’re gone, driving frustration for some buyers.


If you’re a seller, now is a great time to sell. If you price your home reasonably, you’ve got a good chance of selling, and you may even receive multiple offers that will drive up your home’s value.


If you’re a buyer, it’s important to go into the process knowing exactly how much you’re willing to spend, and how much a given property – or its features – is worth to you. Be prepared to put your best offer forward, and know when it’s ok to raise your offer, or when to bow out gracefully and look for another property.


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