How Supply and Demand Can Impact Your Buying and Selling Goals
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In today’s housing market, there are far more buyers looking for homes than sellers listing their houses. Based on the concept of supply and demand, this means home prices will naturally rise. Why is that? When there are more people trying to buy an item than there are making that item available for sale, that drives prices up. And that’s exactly the case in today’s housing market. So, knowing what’s happening with the inventory of homes for sale and the demand for housing is crucial for today’s buyers and sellers.
Nationally, Demand Is High and Supply Is Very Low
The latest buyer and seller activity data from the National Association of Realtors (NAR) indicates buyer traffic heavily outweighs seller traffic today, as shown in the maps below. There are far darker blues (strong buyer activity) on the left and much lighter blues (weak seller activity) on the right. In other words, this shows how the demand for homes is significantly greater than what’s available to purchase.
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What Does This Mean if You’re a Seller?
Supply is struggling to keep pace with demand. In fact, the inventory of homes for sale recently hit an all-time low. That gives you an incredible advantage when you sell your house. With so few listings, it’s likely more potential buyers will view your house – especially if you work with an agent to price it right. That means there’s a high chance you’ll receive multiple offers or buyers will enter a bidding war for your house. And that dynamic can drive the sale price of your home up.
What Does This Mean if You’re a Buyer?
As a buyer with fewer options available, you’re likely to see more competition, so you need to be strategic to win. First, make sure you have a trusted professional on your side. Your real estate agent will help you understand your local market and work with you to act quickly when the time is right. Even when it’s challenging to find a home, you can still succeed as a buyer today if you have a trusted advisor on your side every step of the way.
Bottom Line
Whether you’re a homebuyer, seller, or both, knowledge truly is power. Let’s connect today so you can better understand what’s happening in our local market and achieve your homebuying and selling goals this year.
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Led by Lumber and Paint, Building Materials Prices Jump in January
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The prices of goods used in residential construction ex-energy climbed 3.6% in January (not seasonally adjusted), according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. The index was led higher by a 25.4% jump in softwood lumber prices and 9.0% price increases for indoor and outdoor paint.
Building materials prices increased 20.3%, year-over-year, and have risen 28.7% since January 2020. Over the past four months, the index has climbed 8.4%.
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The price index of services inputs to residential construction increased 2.9% in January following a 1.3% increase in December 2021. The index declined 13.5% between June and November last year but has increased 4.1% in the two months since. The index is 8.9% higher than it was a year prior and 24.1% higher than the January 2020 reading.
Softwood Lumber
The PPI for softwood lumber (seasonally adjusted) increased 25.4% in January following 21.3% increase the month prior. Since reaching its most recent trough in September 2021, prices have increased 73.9%. According to Random Lengths data, the “mill price” of framing lumber has more than tripled since late August.
The PPI of most durable goods for a given month is largely based on prices paid for goods shipped, not ordered, in the survey month. This can result in lags relative to cash market prices and is why last month’s post indicated that “another sizable increase in the softwood lumber producer price index may be in the [January 2022] PPI report.”
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Paint
The PPIs for both exterior as well as interior architectural coatings (i.e., paint) increased 9.0% in January. Year-over-year, the prices of exterior and interior paint have climbed 30.3% and 21.2%, respectively. Prior to 2021, the record 12-month price increase for exterior paint was 8.5% while that for interior paint was 10.1%–each of which was set in March 2019.
Steel Products
Steel mill products prices declined 1.9% in January, the first decrease in nearly a year and a half. Monthly increases in the PPI for steel mill products slowed in each of the five months preceding January 2022.
Even after the decline, however, prices have more than doubled over the past 12 months.
Ready-Mix Concrete
The PPI for ready-mix concrete (RMC) gained 1.4% in January after increasing 0.6% in December. The index for RMC increased has been relatively volatile since mid-2020 and has climbed 9.1%, year-over-year (YoY). Prior to January 2021, year-over-year price increases had not exceeded 8.0% since December 2006.
Prices have risen an average of 0.6% per month since January 2021—double the 20-year average but lower than the housing boom average (+0.8%).
At the regional level, prices increased in the Northeast (0.4%), Midwest (0.9%), South (1.7%) and West (4.4%). While RMC prices showed modest increases (year-over-year) in January 2021, the 12-month increases were significantly larger in January 2022 in each region except the Northeast.
Gypsum Products
In January, the PPI for gypsum products climbed 3.4%–the 11th consecutive monthly increase. Gypsum prices have decreased just once since August 2020 and have risen 31.4% since then.
Gypsum products prices have gained 23.0%, year-over-year, the largest increase since data became available in 2012 and more than quadruple the 10-year average.
Other Building Materials
The chart below shows the changes in other price indices relevant to the residential construction industry since January 2020.
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Some Highlights
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There’s an influx of buyers looking for homes today, and that means your house is in high demand. Here are a few reasons why so many people are looking to buy a home.
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Buyers are motivated to beat rising mortgage rates, and many want to escape rising rents. There’s also additional demand from millennials who are reaching peak homebuying age.
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If you’re thinking about selling your house, today’s demand is great news. Let’s connect to begin the process of listing your house while buyers are ready to purchase.
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More People Are Planning To Buy a Home Soon
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While some homeowners may be tempted to hold off until spring to list their houses, you should know – homebuyers aren’t waiting. Demand is high today as more people are trying to beat rising mortgage rates. As a result, eager buyers are entering the market or moving their plans up so they can make their purchases as soon as possible.
The most recent Consumer Confidence Survey finds that, of those surveyed, the percentage of people planning to buy over the next six months has increased substantially since last fall (see graph below):
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As the graph shows, the number of consumers fast-tracking their plans to purchase a home has crept up over the past three months. That indicates many buyers are evaluating their strategy and realizing they should act sooner rather than later. And for homeowners planning to sell, it’s a signal that now may be the time to list.
While more people are moving their plans up, others are actively putting theirs in motion. Time on the market is a great indication that homebuyers are motivated and moving quickly. According to a recent realtor.com report, the average home sold faster this January than any January on record.
“Homes sold at a record-fast January pace, suggesting that buyers are more active than usual for this time of year.”
What Does That Mean for You?
Homebuyers are rethinking their strategies and moving their plans forward. Others are making their moves today. That means demand for your house isn’t just increasing – it’s high right now.
And because there are so few homes available for determined purchasers to choose from, if you’re planning to sell your house this year, doing so sooner means you can take advantage of high buyer demand before more houses are listed in your neighborhood.
Why is this important? Because as more houses are put up for sale, buyers will have more options. But until then, your house will be in the spotlight.
Bottom Line
With so many buyers eager to make a purchase, you could benefit by listing your house soon. To understand how strong buyer demand is in our area, let’s connect so you can start making your plans today.
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Licensed in the State of Oregon since 1997
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Patti Williamson
Principal Broker Owner / GRI
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If you have questions or are ready to buy or sell, don't hesitate to reach out!
503.932.1267
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