Housing Market Supply And Demand

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Editor:

Economics 101 teaches that where there is an over-supply, prices will be driven down until supply and demand are in balance. The real estate market has been experiencing an over-supply for the past couple of years.

If we are to see our market area “bottom out” in 2009, it will be necessary to reach balance in supply and demand.

There is something we can do to help affect that result. If only properties where the owner absolutely must sell as soon as possible were listed, this would help reduce the over-supply. If an owner is “testing the market” or expecting a high price and willing to wait for it, it would benefit them, and us, if they would cancel their listings and wait until the market recovers. This would help stabilize prices and focus buyers on properties where a sale is more critical. This would take some pressure off of desperate sellers and help them feel they do not have to keep dropping their asking price.

Getting these homes sold first will benefit other sellers later by not having to compete with several desperate sellers.

Another thing that will help, stop dropping asking prices. If you must sell and you have your home reasonably priced, maybe there is no need to continually drop the price.

Currently, the competition between sellers for a buyer is one reason sellers lower their prices. Price is the only piece of the puzzle that they control. They try to stand out from the competition by having the lowest price. The problem with that philosophy is that it is only valid until another desperate seller cuts your price.

This creates a downward spiral in prices which affect the market values in the neighborhood.

If everyone would stop dropping prices, prices would stop dropping!

Mike Foil

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