Is a balanced market coming soon? If you’ve been keeping an eye on the housing market over the past couple of years, you know sellers have had the upper hand. But is that going to shift now that inventory is growing? Here’s a breakdown of what you need to know.
A Balanced Market Defined
A balanced market is generally defined as a market with about a five-to-seven-month supply of homes available for sale. In this type of market, neither buyers nor sellers have a clear advantage. Prices tend to stabilize, and there’s a healthier number of homes to choose from. Sellers have had all the leverage since COVID. Clearly, a more balanced market would be a welcome sight for people looking to move. The question is – is that really where the market is headed?
What Is the Housing Supply Locally and Nationally?
After starting the year with a three-month supply of homes nationally, inventory has increased to four months. That may not sound like a lot, but it means the market is getting closer to balanced – even though it’s not quite there yet. The Mid-Atlantic supply of homes in July was just two months – up from the 5 year average of 1.5 months – hardly a tsunami of supply. Interestingly, the supply of homes in DC in July was 4.4 months and in Montgomery County it was only 1.4 months of supply. The supply of homes in the Washington DC Metro area was 1.8 months versus a 5 year average of 1.4 months of supply.
It’s important to note this increase in inventory is not leading to an oversupply that would cause a crash. Even with the growth lately, there’s still nowhere near enough supply for that to happen.
The graph below uses data from the National Association of Realtors (NAR) to give you an idea of where inventory has been in the past, and where it’s at today:
What a Balanced Market Would Mean for You
Here’s how this shift impacts you and the market conditions you’ll face when you move. Lawrence Yun, Chief Economist at NAR, explains:
“Homes are sitting on the market a bit longer, and sellers are receiving fewer offers. More buyers are insisting on home inspections and appraisals, and inventory is definitively rising on a national basis.”
Locally, we are seeing an increase in days on market and a drop below 100% in the relationship of final sales price to original list price, indicating that sellers are not getting multiple offers over list price. While we are not at a balanced market yet in the DC metro area, we are definitely moving toward one. As interest rates drop, more buyers will be likely to come into the market, hopefully putting their current homes on the market.
If you are thinking of buying or selling this fall, let’s talk about how this changing market will impact your plans. Please email me at lise@lisehowe.com or call me at 240-401-5577.
