- The Washington Times - Thursday, September 8, 2005

Supply and demand are basic economic principles. When supply exceeds demand, you’re in a buyer’s market because prices are low and choices are plentiful.

When demand exceeds supply, you’re in a seller’s market because competition among buyers results in quick sales and high prices.

Since 1999, the real estate market in the Washington metropolitan area has been a seller’s market. Particularly since 2001, sellers have had an easy time selling their homes for good money. Supply has been low, and demand has been high.

Now, the market appears to be beginning to shift. Supply is up, but demand is flat.

The number of homes placed on the market (listings) has set records in recent months. During the first half of 2005, nearly 80,000 homes were put up for sale. That’s an increase of 3 percent over last year.

In July, listings rose dramatically. New listings were up 12 percent compared to July 2004.

A “listing” is a home placed in the regional sales database by a Realtor. This area is served by Metropolitan Regional Information Systems (MRIS). The MRIS database contains thousands of homes for sale every day.

Now, with sufficient demand, a rise in listings is no big deal. The additional homes for sale would just be gobbled up by eager buyers. As a result, the inventory would remain low. Inventory is the number of homes on the market on a given day — it’s the selection available to buyers.

However, not only have listings risen, but the inventory has gone up as well. That means there is insufficient buyer demand to absorb the additional listings.

If supply continues to rise, we’ll see this region’s seller’s market slowly wind down. It will take a while, however. I imagine we will remain in a seller’s market for quite some time.

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

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