Basic Supply And Demand Still The Key In Real Estate
The law of supply and demand is a basic economic principle that explains how the interaction between the two affects the price of particular goods or services. When there is high demand for something, prices rise. If there is a large supply but not enough demand for it, the price will fall.
Supply and demand work against each other until a point in which the equilibrium price is achieved—the price where supply is equal to demand in the market.
According to the National Association of Realtors (NAR), across the country we currently have a 4.1 months’ supply of homes on the market, (however, this figure varies greatly depending on the region as well as the price point). Historically, 6 months of supply is considered a balanced market.
If there is over a 6 months’ supply, it is considered a buyer’s market, and prices will likely depreciate. Anything below 6 months is considered a seller’s market, and prices are apt to appreciate.
Since there has been an inadequate supply of homes on the market for some time, and with states beginning to open up more, there is mounting pressure on prices. As more buyers return to the market, a limited inventory of homes for sale could push prices higher.
Many expected home prices to depreciate due to the economic slowdown from the coronavirus. More than 38 million Americans have lost their jobs since the outbreak of the COVID-19 pandemic. Stay-at-home orders immobilized much of the economy, prompting trillions in stimulus spending by the federal government.
In fact, housing demand did fall as buyers lost their jobs, part of their income, or simply didn’t want to be shopping for a house in the middle of a viral outbreak. But while demand dropped, supply also dropped as potential home sellers pulled out for many of the same reason’s buyers did.
A weekly survey by the NAR noted that 74 percent of agents said clients have not reduced listing prices to attract buyers, revealing there is no panic selling despite the uncertainty in the overall economy.
Homes continue to be in great demand in El Paso county. The most recent snapshot of the market revealed only one month of inventory being available, compared to the historical average of 1.5 months. The average sales price was 5.7% higher than the same period in 2019, as reported by the Pikes Peak REALTOR Services Corp.
Because both supply and demand dropped, the relationship between the two went largely unchanged. It’s hard for prices to move when there aren’t enough transactions to move them.
There are signals that housing markets across the nation are building back up. Certain metrics, such as mortgage applications and pending home sales, have returned close to their normal in cities less affected by the pandemic.
Buyers are encouraged by record low mortgage rates and experts don’t predict that will change in the near future.
Whether you’re selling or buying, taking advantage of the current market trends is much smoother when you partner with a professional real estate agent. Buying and selling property is complicated enough, during such unprecedented conditions there’s even more hurdles to overcome.
The Platinum Group, Realtors provides experienced, local professionals with the best tools and resources to provide home buyers and sellers with platinum service and platinum results. With over 80 percent of their business coming from referrals, The Platinum Group, Realtors deliver top quality customer service the utmost honesty, integrity and attention.
For a no-obligation consultation, call today: (719) 536-4478 or visit PlatinumHomesSales.com.