It’s a simple factor in market economics… supply and demand dictate pricing.
- As demand increases, so will prices if supply doesn’t keep up.
- As demand decreases, so will prices if supply doesn’t follow suit.
- As supply increases, prices will drop if demand doesn’t keep up.
- As supply decreases, prices will skyrocket if demand doesn’t drop.
This concept, of course, applies to real estate and is something you, as a home buyer and/or seller, should be keenly aware of at all times. Over the past 2 years, home inventory levels (supply) have been at levels considered ‘unbalanced.’ They’ve been higher than ideal and have created what many call a ‘buyer’s market.’
However, over the past few months, these inventory levels have been steadily decreasing, due in part to the Home Buyer Tax Credit., as evidenced in this chart:
To sum it up, here’s the part you should be keenly aware of right now:
An inventory of 5.7 months means sellers are regaining some leverage for negotiating, although buyers still have some advantage.