Real Estate - An Information Website > Purchasing

Supply and Demand

The sales price of a single family home in the Bay Area is dependent on the supply and the demand of the homes. If the supply, or inventory, is low and the demand is high, then prices will increase as the chart shows below in the year 2007. Prices that year increased about nine percent. If the supply is high and the demand is low, like the year 2009 shows below, then prices fall.

Another thing to keep in mind is that during any given year, the inventory changes throughout the year. In this area, the supply of homes is always lowest around January 15^th of each year. The supply increase steadily each year until around June 15^th. The rest of the year, the supply gradually decreases until it hits the low point at January 15^th again. This pattern has been accurate for almost 50 years.

The pattern is formed around a concept called, “throughput.” This describes the amount of homes listed in a one week time frame versus the number of homes that are sold during the same timeframe. In the spring time, the throughput is usually around 12 homes listed per week with 9 homes sold each week. Therefore the total inventory increases weekly. In the summer and fall, the throughput is around 5 homes listed each week and 7 sold, therefore the inventory decreases.

One of the reasons for this pattern is that the school systems are a dominant factor in the values of homes in this area. A resident must reside within the boundaries of a school district by June 15^th in order to be enrolled in the coming school year starting in August. This causes a bit of a rush each spring. Another reason for the pattern is that each summer, the market slows due to the number of households with children that are on summer vacation. September and October are busy months again with lots of activity, and then the market slows again between December and February due to all of the holidays in all of the different cultures.

Buying and selling a home can be affected by these patterns, so a wise buyer and seller will look at what is happening in the market when making a move in real estate.