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DJ Campbell

DJ Campbell


Inventory Levels and Supply and Demand

(Published on - 7/21/2017 9:31:31 PM)

You may have heard from me (or your neighborhood Realtor) that the market has been hot so far this year! In my area of Milwaukee, the North Shore region, the median home price sold in March climbed 8.9% during the month and inventory levels have dropped. 

You may be thinking: what does this mean for home buyers and sellers? If you are looking to sell a home, it is an excellent time to list on the market and get some of the equity that has hopefully been growing in your home.  However, for buyers, it is getting harder to find your next dream home since inventory levels are dropping.

What is supply and demand?

Market supply and demand for any product typically intersects to create the best perceived price for a good or service. Increasing demand will usually have an inflationary reaction to prices, where increasing supply can do the opposite. A good example in history is Cabbage Patch Dolls, Tickle Me Elmo dolls, or last year’s Hatchimals toy. Kids were crazy about these toys and got their parents out in droves to try and grab them for gifts; demand was off the charts. This created a secondary market on places like where prices were skyrocketing for a $20 doll! 

The same can be seen now in my local real estate market. The economy is still strong with positive growth each quarter, dropping unemployment, and retail consumption is increasing year-over-year. There is an increasing buyer market as millennials are beginning to purchase their first homes and start a family, and baby boomers are looking to downsize. 

What is the absorption rate?

You may have read about housing absorption rates during your home buying research. It is a statistical measure where we look at the number of homes sold over the last few months and divide that from the total outstanding inventory. As the number of sales increase and inventory decreases, this measure goes down, and vice versa. A lower, or faster, rate can indicate an inventory shortage and price increases coming in the future. As supply drops, this can drive market prices up. 

What does this all mean for our market?

Year over year, many neighborhoods have seen a 5-7% increase in sale prices on homes, so it is an opportune time to sell. If you need more room or are at a point where you would like to downsize, you may find selling your home easier than you thought.


Want to learn more? Curious what your home might be worth in today's climate? Fill out the contact form below and I am offering a free, no obligation home value estimate. Let's sit down and talk real estate!




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