Defying The Law of Supply and Demand
By Jim Palmer Jr.

 In economic theory the relationship between the quantity of a product that owners wish to sell and the quantity consumers wish to buy is called the Law of Supply and Demand.  The price is determined by the interaction of supply and demand in a market.

The current Spokane regional real estate market seems to be defying this theory, at least temporarily.  Usually as prices rise the quantity offered increases and the willingness of consumers to buy declines.  That is the law of demand.  The law of supply says that at higher prices, sellers will eventually supply to much (or more) of an economic good.  But it seems that our current market is just the opposite.

Recent year-end- statistics for closed sales of single family homes on less than one acre, (including condos) show that average closed prices are up from the same time last year by over 21%, and yet housing inventory last month was at its lowest point since Realtors® began keeping records in the 1980’s.  That means the current supply represents slightly more than a 10 day supply. The same time last year that supply was about 30 days worth.

Prices are rising but the demand does not seem to be decreasing!  Buyers are clamoring for higher priced inventory in larger numbers than ever before while developers are scrambling to fill that need, but are unable to do so, leaving many consumers wanting and waiting for the supply side of the equation to balance with the demand side.

 What makes this dilemma even more frustrating for buyers is that interest rates are at an all time low.  Many who want to take advantage of low usury rates are unable to do so because of the dearth in inventory.  Rates currently advertised below the 2% mark would have been unheard of just a short time ago.

The moment homes are exposed to the market, sellers are being inundated by multiple offers to the point where they may even feel the property had been under priced by their broker.  The data base used by brokers that shows sold properties for even a few months back might be outdated in the short time it takes to get a property exposed to the market, leading many sellers to pad a suggested list price to account for those rising prices.  Even the best gymnast can defy gravity for but a moment!  What goes up must come down!