Housing Supply and Demand
Classic supply and demand conversations reflect the fact that if something is in limited supply and the number of people who want it is greater than the number of items available, the price of that item can go up. This is true for the coveted “toys of the year” each holiday season, though I still don’t get the appeal cabbage patch dolls held all those years ago. Reservations at a hot restaurant in town can be hard to come by for the time or date you want, if at all. Concert tickets too, think of what some people were willing to do to get Taylor Swift or Beyonce tickets last year!
What limits supply and exacerbates the issue of too many dollars chasing too few goods can vary by industry. Only so many toys are made and if manufacturers don’t anticipate what the hot toys will be, they don’t have a supply. This year, that happened with K-pop Demon Hunters – neither Mattel nor Hasbro contracted to make them for the season and that was unfortunate for the kids and for their bottom lines.
Looking at the real estate market, we can see how supply and demand influences home sales. Right now, most people feel there are too few options. Still, interested buyers look constantly.
More homes can be built and brought to the market, but current building practices of a crew on site raising a house from the foundation takes time. Doing so one single family home at a time is less efficient than building many homes in a new development. Here in Mount Sinai, there are not many newly constructed single- family homes. There are new apartments being built and they are available for lease. New single-family homes for sale are in shorter supply. Assuming that a newly built home hits the market every couple of months, they are not quickly raising the available inventory.
The overwhelming majority of listings are of existing homes. Those homeowners need to be willing to list their condo, town home or house for sale. In general, that means they need a place to go, willingness to leave, openness to giving up a low interest rate they locked in during covid. In other words, there are barriers to more listings because the current owners need to be convinced or come to their own conclusion that selling is a good idea. If only a couple of homes are listed each month, only a couple of buyers can make a purchase.
Across the country, the number of homeowners with interest rates in the 6% range is now slightly higher than the number who enjoy pandemic-era pricing in the 3% range. If homeowners don’t feel they are losing out by giving up a low mortgage interest rate, the decision to sell is a little easier. Interestingly, a third of all homeowners have no mortgage debt. For those buyers who own the home “free and clear,” the question may be more about whether they need mortgage financing for a purchase and whether they want to take on that monthly payment in the future to buy a new place.
For home sellers who’d like to stay in the area but need a different housing solution, they may be waiting to list until just the right next home for them comes on the market. That does slow the process because for most of us, we need the money from the sale of our home to purchase our next one. The transactions, sell and buy, for most people have to coordinate so they go seamlessly from their current home to the new one.
Buyers continue to search for homes. In general, while decreasing interest rates will entice more buyers into the market, without more listings, the buyers are likely to continue to see prices that may be higher than they want to pay. Home pricing is a reflection of recent sales of similar homes. Limited supply and increased demand may keep prices in the short term near or slightly above where they are today.
If you’ve been considering what the best time is to buy or sell, keep in mind that individual life situations drive that more than external factors. The number of listings and the number of interested buyers may vary but homes that are listed at reasonable market value will always be sought after.
