Like every industry, real estate is all about supply and demand. With all the reports noting the steady recovery in the housing market over the last year, it’s not rebounding as quickly as analysts had hoped. Reasons for the slow build have been listed as oddities in the weather, changes in lending requirements and the steady rise in interest rates, but the fact of the matter is, there are simply not enough homes available for sale to keep up a consistent pace to build the market up fast enough.

In a recent report, Freddie Mac noted that real estate inventory is at a historic low.

“Including newly built homes in the inventory count, the total number of homes offered for sale relative to the number of households in the U.S. has been running at the lowest level in more than 30 years, as shown in the second exhibit. The relatively low for-sale inventory reflects several features of today’s market.”

“A supply-constrained market (holding other factors constant) will result in a decline in the volume of sales and an increase in real transaction prices.”

Supply and Demand

 The basic premise of supply and demand notes that when demand increases and supply, in this case inventory of homes available for sale, a shortage occurs. This shortage drives up the median prices of the supply. Historically, to sustain consistent growth, the US real estate market requires a six month supply of real estate inventory. NAR recently reported that our current homes inventory number is standing around 5.5 months available.

This means that if you are looking to sell your home, there is no better time to begin the process. With a decreased supply, you are potentially able to get more money to sell your home due to the demand for real estate. Also, make sure you get a mortgage pre-approval before you sign the listing agreement to ensure you can afford your next dream home.

If you’re considering putting your home on the market, and need to reach out to a local real estate agency to gauge how your local real estate market is being affected by the decreased supply; we can recommend an agent who knows what inventory is available around you, and give you an idea of how lucrative listing your home for sale could be.

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