Sellers need to price for new market

The inventory of homes for sale in the Washington metropolitan area climbed to 28,200 last month, meaning that buyers had plenty to choose from, but that sellers had to sit and wait for offers.

Last month's inventory was huge compared to February 2005, when only 9,800 homes were on the market. That was the lowest inventory for any February on record, while last month was the highest since 1999.

Because so many homes were up for sale last month, they sold slowly. Homes sold in Frederick County last month had been on the market for 73 days, compared to only 38 days last year.

This is a new reality that sellers are going to have to adjust to. For the past several years, a properly priced home in a decent condition would usually sell in a week or less. Hot neighborhoods saw homes selling in a day or two.

Now, homes are selling in a month or two.

As a result, sellers are going to have compete on price, something they haven't done in years.

This will have an impact on home prices because buyers simply aren't going to bid higher and higher on a home when there are so many others to choose from.

And sellers aren't going to be asking as much to begin with because they are beginning to recognize the perennial truth that "price sells."

Because inventory was so high, and sales were down 14 percent, sales chances in February were only 28 percent. Last year, they were 93 percent.

Sales chances are my way of measuring the level of competition in the real estate market. Dividing sales figures for the month by the inventory on the last day of the month results in a percentage -- a figure below 20 percent indicates a buyer's market. Higher figures mean we're in a balanced market or a seller's market.

While most jurisdictions are now balanced markets, some have already made the switch to buyer's markets, as you can see in the charts.

Contact Chris Sicks by e-mail (csicks@gmail.com).

Statistics in this story reflect a metropolitan area that includes the Maryland counties of Montgomery, Prince George's, Anne Arundel, Howard, Charles and Frederick; the Virginia counties of Arlington, Fairfax, Loudoun, Prince William, Spotsylvania and Stafford; the city of Alexandria; and the District.