Ventura’s Supply and Demand

by Teryn on May 1, 2012

March 2011-2012 For Sale vs Sold by Month

Real Estate Parcels are Unique and Finite:

You cannot fill a real estate supply shortage by manufacturing more identical units. Each piece is different and there is a finite supply. It’s not a manufactured commodity. Though you might be able to create more condos in a give space, the space itself is unique and cannot grow to accomodate a short supply.

Real Estate Cannot be Moved to Fill Shortages:

If there is a shortage of land for homes in a given area, you cannot move in more land to alleviate the shortage. Real estate is where it sits. For this reason, it will always be a local commodity influenced by local conditions.

Over-supply Means Lower Prices:

Because of the first two items above, you can usually expect there to be a fall in prices when there is an over-supply of homes or land in a given area. You cannot move the overage to another area to keep prices stable.

Under-supply Means Higher Prices:

If there isn’t enough land or homes in a given area, then prices will almost always rise. Even if there is the ability to construct more homes, the time delay cannot fill the demand and prices will rise.

Always Remember that Real Estate is a Local Business:

We all read about trends in interest rates, national home price trends, new housing starts and many more economic indicators that influence the real estate markets. It will serve the real estate professional well to keep up with this information, but to always keep in mind that this is a local business. There can be many forces influencing your local market that will have little or no impact in other areas, and vice versa.Supply and demand in real estate isn’t as easy to balance as it is in manufactured commodities. Making more takes time, and there may not be room to make that happen in any given area. You can’t move it to where the buyers are.

Pay careful attention to the factors that influence your local market. If you’re in a market that has industry and a great many relocations for jobs, watch your local businesses and industries carefully for up or down sizing. If your market is resort, vacation or second homes, factors that can have great impact can include the local weather trends, aging of the population, general stock market and investment health, etc. Things that impact discretionary income have more of an influence on this type of market.

In short, keep up with the big picture, but regionalize your primary focus. Supply and demand in real estate will always be a local issue.

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