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Market Supply and Demand

Savvy real estate investors already understand the effects of supply and demand on market pricing. As a broad statement, when housing supply is high, then prices are low. When supply is low, then prices are high. While general statements can be made about the housing market supply and demand, it is generally segmented into price ranges and property types. One segment by property type and/or price range could have a high supply while another segment could be low. Within the Topsail market we analyze and track the market across seven (7) different property types each having 3-5 price ranges to better understand the arena in which we work. This is part of our commitment to insure that we are knowledgeable about our market and share the same with you so that you can make informed buying and selling decisions.

The phrases, “It’s a Buyer’s Market” or it’s a Seller’s market are tossed around fairly loosely. What do these terms mean? On a national level, the market is said to be a Buyers’ market when there is greater than a 6 month supply of houses within a particular market segment. It is a Seller’s market when the supply is less than a 6 month supply. The secret behind the number 6 is the average length of time that it would take to reproduce the same product. In a Seller’s market, prices are generally rising and the Seller has more negotiating power and command of pricing. The converse is true in the Buyer’s market. Market supply is determined by multiplying current market supply within a specified segment by a specified time period divided by the number of houses sold within the same time period. There are could be other factors applied, but in simple math, if there are 12 properties currently on the market and 24 sold in the past 12 months, one could reason that 12 properties would sell in 6 months, so therefore there would be a 6 month supply.

A couple of notes or tidbits about the second home market and in particular here in our NC coastal markets. While 6 may be the equilibrium number for a “balanced” market between buyers and sellers, 8 may be a better number to use because of the general length of time that it takes to build. Another factor to consider when discussing the market supply is that using sheer numbers and market segments does not account for quality of inventory. Yet another factor can sometimes color market supply numbers. Coastal communities experience more ebb and flow in the market based on tourist seasons. Supply may rise over the winter months and then shrink during the spring, summer, and fall months where there are more potential buyers actually visiting and becoming inspired to take action. As your agent, we can assist you in understanding the market trends and conditions.