Monthly Housing Supply and its Impact on Pricing

Sellers Market, Buyers Market, Where Are We?

What drives housing prices?  That's easy, it's a simple case of supply versus demand.  The price of anything in the world is determined by how many people want to buy it and how much of it is available.

In the housing industry, this is a fairly easy statistic to gauge.  We look at known supply, or the number of homes for sale in the market.  Then we compare it to the number of home sales.  We then come up with a figure spelling out how long it would take to sell the current supply based on these sales figures.

For example, if you have 10 homes on the market and an average of 2 sell each month, you would have a 5 month supply.

Supply and demand in the housing market follows a typical formula.

• If there's a one to five month supply of housing we consider this to be a sellers market.  Do to the lower supply, home pricing is going to increase.  The lower the supply, the greater the increase.
• A healthy, or stable, market would offer a five to six month supply of housing.  Pricing in this scenario will generally remain stable except in the case of inflation which we're not experiencing right now.
• Anything greater than a six month supply and we consider ourselves to be in a buyers market.  With a large supply of inventory, sellers will typically lower the price of their home to stand out from the competition, thus we see depreciating housing prices.

So where are we at in the Chicago market?  A look at MLS data through September of this year shows we are in fact in a sellers market.

In the Kane County, IL region, we've seen a definite decline since a peak in July of 2009.  Around October of last year numbers dropped low enough to bring us into our current sellers market.  As predicted, we have seen prices increase as a result.  Over the last year prices have been slowly but surely increasing as a result.

Moral of the story?  If you've been considering selling your home in the far west suburbs of Chicago, there's never been a better time.  Inventory is low, prices are high, and buyers are in fact out there.  As we enter the fall and winter months, inventory will continue to fall meaning even less competition on the market.

Now would be the time to find out what your Fox Valley home is worth.  You can get a complimentaty no-obligation analysis of your home's value by contacting The Kombrink Team at RE/MAX Great American North in St Charles at 630-488-3300.