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Inventory and Economics. Experiencing the Lesson First Hand.

Posted by Jeff Brooks on Wednesday, February 27th, 2013 at 2:32pm.

If the Real Estate catchphrase of 2012 was “interest rates” 2013 will be “inventory”.  So far it’s been a fantastic and frustrating 2013 for us realtors here in Newport, and per the media, we’re not alone.  Inventories nationally are at 13 year lows.  As I mentioned in a blog post back in November, inventory levels were continuing to decrease, pointing towards a renewed seller’s market.  Looking at charts here in Newport County the trend doesn’t seem to be changing.  

inventory levelsThese charts make me think back to my Economics Classes at Saint Anselm College with Professor Romps, specifically about supply, demand and the “invisible hand”.  Prof. Romps was a 6’3” 280lb angry 65 year old man.  It was impossible to fall asleep in his class even at 9am on Friday. In the end, he turned out to be one of my favorite teachers because of how entertaining and, ahem, “motivating” his lectures were.  We were taught when supplies decrease, demand stays constant, prices increase.   With this in mind, Real Estate is considered to be “inelastic”, meaning the invisible hand is slower to move pricing than say that of gasoline.  Prices slow to respond to the low inventories, but overtime the change we’re all expecting will come to fruition.

 

We’re also experiencing an increase in demand with less conceived risk, more buyers and low mortgage rates.  Coupled with increasingly low Supply & Demandinventories, we’re seeing pricing start to increase, causing even stale inventory to go under contract.  (Newport sales prices are up 7.8% from this time last year, volume is up 11.9% and distressed sales are down 66.7%)

With the lack of inventory and increase in demand, sellers will be allowed to be more liberal with their pricing. Over the next year or so, as long as demand stays consistent, we’ll continue to see prices climb. 

Hopefully we can see inventories start to pick up.  I have plenty of buyers that keep telling me “Jeff, we don’t see anything on the market, so we’ll wait until more inventory comes on.”  So, to sellers out there reading this: Please list your house so I can sell it!

Jeff Brooks, Realtor, Hogan Associates, 129 Bellevue Ave, Newport, RI  02840 401-484-7368, Jeff Brooks the REALTOR 

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