Rocket scientists speak of “equilibrium”. When they launch a rocket, the forces of the motor’s thrust and gravity compete and are not in balance. If the thrust exceeds gravity, the rocket soars and the rocket reaches orbit where it coasts without further help of its motor. The forces are balanced, and that’s equilibrium. If gravity exceeds thrust at launch, there’s usually a big mess to clean up before beer call.
Supply and Demand
Real estate prices also seek equilibrium in the competing forces of supply and demand. In the absence of equilibrium, prices will go up if demand exceeds supply, and down if supply exceeds demand. When supply and demand reach an equilibrium, prices stabilize and don’t change much over time. Real estate prices are never constant for long, though, because lots of things in the economy can change the market supply and demand equilibrium.
Utah in June, 2016
Because of our booming Utah economy with its increasing jobs and population, the demand for housing is not currently being met by the supply of property for sale in our real estate market. These market “forces” compete to increase prices, lower the time it takes to sell a property, and increase the time it takes to find a property to purchase.
According to the June, 2016, Salt Lake Realtor® Magazine, “the biggest barrier facing home buyers today is the limited supply of housing inventory”. This is slowing sales and continuing to increase prices. In April, 2016, there were 1,533 homes sold by Realtors® in Salt Lake County. That’s only 2% higher than the $1,506 sales of April, 2015. The median price is $259,800, up from $244,750, representing a 6% increase from April 2015 to April 2016. Supply is down, and that has driven up prices over the past year, while slowing down the rate of increase in the number of sales. Plus, those properties that are for sale sell very quickly: a median of 10 days, down from 20 days a year ago.
What about the future?
Our economy continues to boom, people move into the state for jobs, and the threat of higher interest rates loom. These forces keep our real estate market moving under competing forces. Supply and Demand—while not exactly rocket science, it continues to be the name of the game in our Utah real estate market.
I have a supply of knowledge and experience to help you if you demand it. If you need help pricing a home for sale or determining what your next purchase will cost, give me a call. First-time home buyers welcomed!