- The Washington Times - Friday, March 26, 2010

No one was surprised to learn that the snow in February put a damper on area home sales. To understand the housing market, however, you need to look at more than sales statistics.

Supply and demand are the duke and duchess of economics. You don’t get a full picture unless you study both.

February saw about 400 fewer home sales than January. That means demand remained roughly the same as it was in January in the Washington metro area. (Remember, however, last week’s column, in which I discussed how Virginia’s sales were down and Maryland’s were up in February. Regional stats conceal that kind of detail.)

So, with demand about the same from January to February, what happened to supply? If supply surges when demand is flat, the market slows down and buyers gain leverage. When supply shrinks and demand is constant, sellers gain some advantage.

PDF: Charting the market

Just 7,853 homes were listed for sale in February, compared to 9,853 in February 2009 and 9,072 in January 2010. The supply of homes fell.

It is rare for listings to drop from January to February. But it has happened two other times since 2000, in 2003 and 2007. Those were years, like this one, when February was snowier and colder than January.

Last month’s unsold inventory rose just a little from January. That’s why sales chances were still 20 percent last month.

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.

Based on reports from area Realtors about activity right now, I expect we’ll see sales chances in the mid-20s for March, reflecting the significant demand among area buyers.

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