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  • Writer's pictureRoyal Family Real Estate

Low supply = higher prices

This may seem obvious. Low supply = higher prices. We have been dealing with extremely low inventory of homes (supply) ever since we came out of the lock down in June 2020. Supply has not been able to catch up with demand and it now seems to be getting even worse and we are only in December. I say only in December because, historically speaking, we still have another 2 months of decreasing supply levels until the spring market.

The below graph will show you the past 3 years and a blue line indicating November each year. You can see the steady decrease of months supply of homes each November. With the supply at 1.5 months for November 2021, that means that if no other homes came on the market, it would only take 1.5 months to go through the number of homes on the market given the current rate of sales. To put that in perspective, a balanced market (neither a buyer or a sellers market) is 6 months of supply. If supply is under 6 months it is a sellers market (prices likely go up). If over 6 months it is a buyers market (prices likely go down).

The next graph shows that prices actually ticked up 1% month over month in November. This is notable because generally prices decline in the fall and winter until you get to February and then they start to move back up. The up and down in the graph shows you in January of every year you hit the low point of median sale price and then it moves up until you get to June - August and then prices move back down until January. The fact that prices rose month over month this November could be a sign that we are at a low point for the winter and may move up from here until next summer. It is only one data point and December may move back down but given the above graph showing how low supply is, I would not be surprised if prices continue to rise on a month over month basis until summer 2022. Weather does play a factor in our market so if it gets extremely cold and / or lots of snow, that will put a pause on demand.

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