Understanding the Dynamics of Inventory


September 26, 2012|By Jeffrey S. Detwiler | President and Chief Operating Officer The Long & FosterĀ® Companies


After what was easily the longest economic downturn in recent times, momentum is building and national headlines are trumpeting news of economic gains. In the residential housing sector, these swiftly-changing market dynamics certainly offer more opportunity for buyers and sellers than what we’ve experienced in recent years—but the recovery-driven changes in real estate have also left some consumers’ heads spinning. In some areas of the Mid-Atlantic region, those who want to buy houses aren’t always finding options that meet their needs at the price point they were expecting and sellers are sometimes surprised to find that their homes are on the market weeks or even just days before they receive offers. As the recovery from the rockiest housing market in generations continues to gain traction and solidify, the fundamentals of supply and demand will not only help us understand the current relationship between buyers and sellers, but also the relative bargaining power of each.

Inventory of homes for sale, in particular, can tell an interesting story about the dynamics of a local housing market. Across the country, shrinking inventories are putting sellers in the driver’s seat as the number of appropriately-priced homes is falling short—in some cases, far short—of the demand by would-be buyers who are in the market for a new home. The National Association of REALTORS (NAR) reports that inventory was nearly 25 percent tighter in June compared to the same month last year and 25 percent lower, year-over-year, in July. This continues a multi-year tightening in many markets throughout the region.

Being aware of how inventory impacts local residential real estate conditions is valuable to both buyers and sellers, and because the environment is changing quickly and varies considerably by market, consumers who arm themselves with local market data and a well-informed Realtor are likely to find historic opportunities to reach their homeownership and/or investing goals.


Given the downturn and the years of headlines of depreciating home values and underwater mortgages, it’s not surprising that many would-be sellers may be wary about jumping into the housing market. But many markets across the Mid-Atlantic region and the country have seen a turn of the tide, presenting sellers with considerable opportunity.

In Washington, D.C., for example, homes are selling in less than 43 days, on average (as of July 2012). Inventory in the metro area has tightened significantly and the Long & Foster agents assisting buyers and sellers in this area report that competitively-priced homes are selling very quickly—many times with multiple offers. Because buyer demand is outpacing seller supply in Washington, D.C., sales prices are climbing and sellers are receiving a higher percentage of their list price.

Similar conditions exist in marketplaces throughout the Mid-Atlantic region, including Baltimore, Philadelphia, and Richmond, which have also seen inventory tighten 27 percent, 18 percent, and 27 percent respectively, compared to the same time a year ago. Although these markets are in a slightly different phase of recovery, we’re likely to see them follow the D.C. trajectory into the future.

Given these market dynamics, now could be an ideal time to list a home and perhaps move up to the dream home that suits your lifestyle preferences. Here are a few things to keep in mind if you’re looking to make a housing-related change:

Learn the Market

We’ve all heard the adage that real estate is local—but never before has this statement been truer than it is today. The economic downturn affected different areas of the country in different ways, and real estate varies significantly by market. What national headlines share about the health of the residential housing market is unlikely to be a direct reflection of what’s happening in your own backyard.

To keep consumers well informed about current market conditions, Long & Foster offers local housing market reports (www.LongandFoster.com) that include data about active inventory levels, median sale price, and how long homes remain on the market before selling, in addition to other information. Evaluating this up-to-date data may indicate to you if there is opportunity in your local marketplace, and could be a reason to consult with a Realtor about listing your property.

Price it Right

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