Jun
05

Increased Demand is Good News for Home Sellers This Summer

June 05, 2014

home for saleBefore the housing market collapse, the 25 markets Redfin operates in functioned as well-oiled machines, machines that spun supply and demand around in smooth circles. Those circles were called virtuous cycles.

Virtuous cycles occur when “housing demand incentivizes sellers to put their homes on the market and become home buyers again themselves, spurring still higher demand and subsequently more supply.” That means as demand increases, so does supply, and, as supply increases, so does demand. Working as they should, virtuous cycles ensure that supply and demand continue to leap frog each other, thus resulting in yearly market growth.

The cycles and the growth stopped during the recession, and while the market has grown since 2008, virtuous cycles have yet to start spinning again, resulting in some interesting benefits for those selling their homes.

According to new Redfin data, demand from prospective buyers for Redfin home tours, including tours of new homes in Chicago, has increased 15.8 percent year-over-year since the end of the recession, indicating that more and more home buyers are getting back into the market. However, once they get there, many find the supply of homes on the market to be lacking. There are simply not enough homes available to meet the buyers’ ever increasing demand.

That is good news for anyone looking to sell their home! When there is more demand than supply, the suppliers (the home sellers) get the better end of the deal, like those in Seattle:

“Homes listed on Seattle’s most trafficked streets that would typically be considered less desirable and, in the past, have been known to languish on the market have recently been selling in a matter of days,” said Redfin agent Febe Cude.

In April 2014, the typical home was on the market only 34 days, compared to nearly 60 days two years prior. Whether it is the Seattle or Chicago real estate market, it is the home sellers who have the pick of the crop these days, as they are able to ask reasonably higher prices from home buyers who have more limited options. With a supply deficit, it is truly a seller’s market.

However, as demand continues to increase, the rust soon could be shaken from supply and the gears of the virtuous cycle might start turning once more. More and more homeowners, initially wary of selling their home and facing a sparse supply of housing, will see the high demand for their homes and put them up on the market, thereby increasing supply. And, as those new sellers look for new homes, demand will increase again, prompting a larger supply of new homes to become available and more demand to be generated. And thus begins the virtuous cycle once more.

It is a slow process, though, one that may not begin again for some time, so now is the opportune time for homeowners to quickly sell their home with the most bang for their buck.

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