Supply, Demand And Real Estate

As pretty much everyone has heard, today’s housing market is one for the record books. There continues to be more buyers than sellers in this market, and it has been that way for years. Based on the concept of supply and demand, home prices will increase to find an equilibrium. Where will this be? Well it depends on how long there will be more buyers than sellers. Real estate remains a scarcity commodity and with new home builds still below historical averages, this does not look to change. So, here is how supply, demand and real estate are all interlinked.

Demand Is High, Supply Is Low

According to the latest buyer and seller activity from the National Association of Realtors (NAR), buyer traffic heavily outpaces seller traffic. The strong buyer activity is shown by the significantly darker areas in the map below. In fact, the highest demand states are some of the lowest supply states. If you look at the seller traffic, there is very few states than have “stable” traffic, most are weak or very weak. This chart is a great way to show the discrepancy in the real estate market.

Supply, demand and real estate all work hand-in-hand, and these charts show the difference. There are consistently higher highs in terms of demand, and lower lows in terms of supply. Take December and January existing home sales numbers for example. More homes were sold during a record low inventory period than the years prior.

What Does This Mean For Sellers?

This is the best time in recent history to sell. In fact, this might be the best time to sell historically. The only downfall of selling now is, where will you go? Rent, new home build and existing home prices are all at record highs. Sellers have an incredible advantage in today’s real estate market, and it will likely continue in the future. Until new construction homes and rentals can be built, housing inventory will significantly underwhelm demand. Even as interest rates increase, there will still be a record number of qualified buyers. In today’s market, sellers are selling in a record low amount of time, while receiving a record high amount of offers. Sellers have all the power in today’s market, and look to control it for years.

Supply, Demand And Real Estate: Buyers

As a buyer in the current real estate market, it is tough. Even working with the right agent might not lead to the results you want. Many buyers are learning the hard way that you need to be strategic to win. Some are writing high offers with no contingencies, some are delaying possession, and some are writing cover letters to stand out. With a trusted real estate professional, you should have the ability to win a home eventually. Even though you may not be able to find your dream home, owning a home is still beneficial. Not only is owning your home beneficial in the current economic landscape in terms of finances, but it is also beneficial non-financially. Whether you are buying or selling, it is important to know how supply, demand and real estate work together.