Inventory and Impact on Prices
It’s common sense that price (of anything) is determined by supply and demand. The more demand that exists, the higher the price. When there is more supply than what is demanded, the price drops.
The chart to the left depicts the effect real estate inventory has on the market and prices.
If there’s 1 to 5 months inventory in the market, that means there’s not enough inventory to satisfy the number of buyers in the market. So, this creates a seller’s market and there will be appreciation thus driving list prices up!
If there is 5 to 6 months inventory in the market, that’s a normalized market. This means prices are going to remain relatively stable.
With 6 months inventory in the market–and please be aware that very few markets have this right now–then we know that there are not enough buyers out there to satisfy the number of sellers who want to sell. So a buyer’s market is created, causing price reductions or lower than normal list prices!
You and your agent should pay close attention to the MLS data and how many month’s supply there are for the type of house you’re interested in buying or selling because that will determine what prices are going to do moving forward!
Contact us at Wilson Realty Group today for assistance with all of your real estate needs!