In the Reno-Sparks market we are sitting at 3.1 months of inventory at the end of September, well below the balanced market level of 6 months. What we have seen is an increase in the month’s supply of inventory. In March 2018 it was at 1.1 months. This increase in inventory has provided some market change – more options for buyers and requirements for sellers to price more competitively. The Shocket Team can show you the market in the your neighborhood or where you are looking. Reno-SparksRealEstate.com
There are many unsubstantiated theories about what is happening with home prices. From those who are worried that prices are falling (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.
However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase. It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything greater than seven months will cause prices to depreciate (see chart below).
According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).
If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.