July was another good month for sellers because area home sales remain strong and the inventory of unsold homes continues to fall.
As you can see in today's charts, home sales were just a little higher than they were in July 2011. More important, the inventory was much lower than it was last year.
That combination -- strong demand and lower supply -- is what makes buyers compete with one another. And their competition is the reason home prices rise and homes sell quickly.
You can see that the time it takes to sell a home varies quite widely around the Washington region. Homes that went to settlement in Northern Virginia and the District in July had spent less than two months on the market waiting for buyers. Those sold in Maryland took longer, sometimes as long as three months.
That disparity has not always been as large. Consider two rather similar counties in Maryland and Virginia: Montgomery and Fairfax. Back in July 2008 (the slowest year for sales in recent memory) homes sold in Montgomery had taken 91 days to sell and those in Fairfax had taken 92 days. Both counties were struggling with slow sales.
But because the inventory has fallen further in Fairfax since then, buyers there are competing more than they are in Montgomery. That's why homes are selling more quickly in Fairfax.
The quickest way to determine a market's level of competitiveness is to look at the sales-chance figures on the charts.
Sales chances are calculated by dividing a month's sales figures by the inventory on the last day of the month, resulting 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.
Generally speaking, when sales chances remain above 30 percent for an extended period of time, buyers are competing enough to keep home prices stable and even push them up.
So we want to see chances remain high without climbing as high as they were in 2002 through 2005. Chances then were 80 percent to 100 percent, and that caused prices to rise too high, too quickly.
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