Perhaps the most interesting thing about current market numbers is the low level of inventory we have and the effect that inventory levels have on pricing and days on market. We have not seen these sorts of numbers in quite a few years. It is easy to make quick conclusions about what the effects low inventory coupled with a surprise drop in interests rates will be on the market. The press is happy to report that we'll see higher prices and faster sales - is this true or is this yet another example of the press putting out some news without really understanding it?
Scarcity of product should drive up prices. Does it? It's a little too early to tell but anecdotally I can tell you that while we are seeing prices firming up and there is some competitive bidding on desirable properties going on out there, the market remains very price sensitive and bringing a home to market over priced will still virtually guarantee that it will languish on the market, regardless of the scarcity. Historically I can tell you that market prices tend to peak when in fact there is an abundance of listings, not in times of scarcity. Prices have typically peaked in a given year when the number of active listings are near their peak, so in fact scarcity in our market doesn't mean rising prices.
What about time on market? You would think that there being fewer listings to choose from would mean more competition which would mean faster sales. Again, a little too early for definitive numbers for the current market, but historically I can tell you again that the reality is counter intuitive. That is to say that the average days on market for a property in fact drops when there are more listing available.
So what gives? Prices go up when there is more choice and listings sell faster when there is more inventory! That's what the numbers say. And it is true, here's why;
People tend to do things as a group. Watch people crossing the street. Regardless of the light if one person starts, everyone goes, and if someone makes a big deal of stopping, everyone stops. Stand on a corner and look at the sky intently. Soon you will have several people doing the same, though they won't know why. When people decide to list their houses, other people also list their houses. When those houses start selling, other people start wanting to buy as well. More sellers, more buyers, prices go up because it's a busy market.
The media is the same, one outlet reports a trend in real estate and they all report it, regardless of whether is has any basis in reality. (see assessment post!).
So the upshot here is that if you are looking and you can find what would make you happy, better to move on it now than wait for more inventory - because historically that just means higher prices for the same product, with less time to think about it!