When Supply Is Down, Demand Goes Up!

supply and demandAnyone who has suffered through an Economics class recognizes (and possibly cringes too) the supply vs. demand chart. Heck, my 6 year old daughter could tell you that daddy has had too many houses to sell and not enough buyers. Well, that’s all changing, and it’s changing faster than anyone I think could have predicted. As hard as it might seem to believe, we are actually about to face a serious home inventory crunch. When the supply is down, demand goes up, when demand goes up, so does the price. See it’s all in the chart over there ←

In the January 2011 Utah County Housing Statistics Report, one statistic in particular caught my eye: new listings were down 13.1%, which was substantial. Even more alarming was when I received the February 2011 Utah County Housing Statistics Report this week and saw that new listings were down 25.0% putting us down 19.3% down year-to-date! If that isn’t a clear sign that supply is heading south, then maybe the cover story of this month’s Fortune Magazine might be a stronger indicator.

Fortune The Return of Real EstateMike Castleman is the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”

Real estate It's time to buy again Fortune Finance

Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. “We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place. “And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd.

Visit Fortune Magazine for the full “The Return of Real Estate” story.

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About utahREpro

Chris is the managing broker for Prudential Utah Elite Real Estate in American Fork, Utah. His passions include spending time with his family, Real Estate, Social Media, traveling, reading, movies, golf, dirt biking and so much more. Chris is a graduate of the National Association of REALTORS (NAR) Leadership Academy as well as the Utah Association of REALTORS (UAR) Leadership Academy. He has served in many capacities in the real estate industry at the national, state and local levels, including: 2013 Treasurer of the Utah Association of REALTORS 2011 President of the Utah County Association of REALTORS (UCAR) 2011 REALTOR of the Year – UCAR NAR Federal Political Coordinator assigned to US Senator Mike Lee 2011 NAR Strategic Planning Committee 2010 – 2013 NAR Public Policy Coordinating Committee 2011 Dean of the LeadershipUAR Program Chris has been a licensed REALTOR in the State of Utah since 2004. He has been recognized both nationally and locally by Prudential and was inducted into their Hall of Fame in 2010.
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4 Responses to When Supply Is Down, Demand Goes Up!

  1. Pingback: February 2011 Utah County Housing Statistics | utahREpro

  2. Pingback: February 2011 Utah Housing Statistics | utahREpro

  3. Industry experts collectively believe that following the central banks move interest rates will ease. That will not happen immediately but down the line after six months it is going to happen. Even though we are not a borrower it will definitely help in getting more advances for our projects and more projects will become reality.

  4. glynis9213 says:

    In Sacramento, California we have 2.2 months of inventory. That is the lowest since March of 2003. I can’t help feeling it has to push prices up. That is going to help us have people finally become move up buyers.
    Glynis Wood-Alberts, Better Homes and Gardens Real Estate

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