- - Thursday, October 13, 2011

Although the Washington region is faring better than most real estate markets in the United States, it still has issues. A backlog of foreclosures and short sales, for example, is a continuing drag on what might otherwise be a dramatic recovery.

Still, the number of homes coming on the market is down 9 percent compared to last year. That means there is a smaller supply of properties, and a lower supply is important in economics because it can translate into higher prices.

The other side of the proverbial economic equation is demand. Fortunately, sales contracts on existing homes are up 15 percent so far this year.

When you consider these two statistics together — supply down 9 percent and demand up 15 percent over the same period last year — you have reasons to be encouraged. If this trend continues during the next six months, we could see a rise in home prices during the more-active spring market to come.

To show the trends in home listings, today’s charts provide information on the number of properties listed for sale with area Realtors over the past four years.

You can see that listings are down quite a bit from 2008. That year, more than 117,000 homes were listed from January through August, compared to 77,493 listed this year.

Look back further, and you will find that 137,000 homes were listed during the first eight months of 2006. That was the year with the biggest supply of homes for sale, and it created the backlog of unsold homes that caused prices to drop so sharply in 2007 and 2008.

I included Baltimore City in today’s charts because listings there are down 20 percent this year, one of the biggest drops in the region. With sales up 14 percent in Baltimore, it is apparent that buyers have to compete more with one another than they did last year.

I also mentioned that a backlog of foreclosures is a problem. One unknown factor is how many additional properties banks are holding. If a bunch of bank-owned properties come onto the market next year, it could disrupt the encouraging supply/demand balance that has been achieved this year.

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