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Real Estate and the Law of Supply and Demand

Most have heard of the Law of Supply and Demand, one of the most basic principles of economics. The law simply states that when something is scarce, and many people want it, the price of the item will rise. On the flip side, when there is plenty of something, and not many people are looking for it, the price of the item falls. The same principle applies to the real estate and your local market. In the state of Connecticut we can see how the law of supply and demand will directly impact you and your bottom dollar, regardless if you are the buyer, or the seller, in the transaction. We find that over the last couple of years our market has seen a bit of an anomoly as it relates to the law of supply and demand.

In January of 2015, statistics compiled of the Connecticut Multiple Listing Service tell us that there were 13977 active listings that month. Of those, 1211 sales occured, with an average sale price was $240055. In January of 2016, we find that there were 14180 active listings and 1504 sales occured, with an average sale of $238990. In 2016, then, we find that there were +1.5% more listings, +24.2% more sales, and +.44% of an average sale price. While that may not seem too much of a difference, historically we can recall that 2015 and 2016 have been pretty lean statistical years in general. Looking back to January of 2014, There were 16706 active listings, and 1308 sales which sold for an average of $258708. Comparing 2016 to 2014, we are -17.8% in active listings, +13.03% in number of sales, and --7.2% in sales.

So what does all of this mean, anyway? It means that in looking at statistics over the last couple of years we are seeing a general downward trend in the number of active listings. We are seeing a general uptick in the number of sales AND we are seeing a basically flat (2016 v 2015) or downward trend (2016 v 2014) in the average sale price. Less houses on the market. More sales. Less of an average sales price. 

That's not very overwhelming positive news for either the buyer, or the seller. For the buyer, it would mean with less houses on the market that you might have less of a selection of homes to buy, though you would probably close on the house that you chose. For the seller it means that even though there's less competition out there, and you would probably sell if priced right for the buyer's market, you're probably selling for less than you would have a couple of years ago. 

As the buyer, or the seller, in the transaction, the greatest benefits will come from actively comparing the property that you're selling (or buying) to like recently sold properties or active properties. In today's market one will quickly learn based on the number, and speed at which offers are submitted, whether the house is priced appropriately, and those houses will be in high demand, and in short supply.