Dealing With Short Supply and High Demand in the Real Estate Market

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The housing market has showed continual signs of improvement nationally and in our local area. With these improvements, it has created many reasons for agents to understand the relationship of short supply and high demand.  While many of us have all heard the terms, perceptions of this fundamental law differs widely from realtor to realtor. While having an increased need for a product is the driving force of any market, there are implications for buyers and sellers in the residential real estate market that must be understood.  Let’s examine the elements of short supply and high demand and how to handle this situation.

 

Different Elements of Short Supply and High Demand

It is fairly simple to figure that for each percentage point that increases in an area’s home sales over the course of a year, the price can be justified in increasing. However, forecasting is also used as a determining factor. For instance, effective market demand uses the potential for increased housing as opposed to actual sales. Real estate investors may use speculation of a particular area to make a projection of new development or an increase in additional housing needs.

 

Another type of advancing a property’s price comes when there are positive indicators for economic growth. The leading indicators for this type of supply versus demand scenario uses population, employment output, and expectations of the market for a certain city. For example, everyone flocked to North Dakota to make thousands per week in the shale tapping industry. Before the workers even arrived, housing prices had gone through the roof and outrageously priced prefab homes were renting for as much as a week’s salary. Realtors knew what type of boom was coming and planned accordingly.

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How to Recognize Short Supply and High Demand

Timing is everything in real estate. Here are a few ways to watch the indicators in the real estate market for different reactions that can create a good position for sales:

  • Read the forecasts from marketing firms
  • Watch the activity of well-known real estates investors as they take gamble on buys
  • Attend city council meetings or Chamber of Commerce events to keep in eye on development
  • Know your local market and keep tabs on pricing increases

 

Finding and Educating Potential Clients
This climate is the perfect time for sharing reasons why higher prices are present with your clients.  Clients, at times, may feel as if prices are too high for areas they were once interested in. Here are a few ways to educate your clients and create value for you:

  • If you have a website, create a blog to educate the public of why buying now and how that purchase could create the potential for value in the future.
  • Form relationships with financial institutions that share your mindset and values for financing- hold workshops, webinars, or lunch and learns to educate prospective clients
  • Pinpoint certain areas where growth is certain to occur and send flyers or host events to showcase the area.
  • Give a quick client course to explain how forecasting in this type of market can only increase the value of an existing home.

Learning the different ways that short supply and high demand are used in real estate pricing can put you ahead of the game. Have your neighborhoods selected, your clients lined up, and take advantage of the future before it arrives.

 

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