By Dave Parrish
It’s a well-accepted fact, markets are governed by the law of supply and demand.
For the past five years the level of inventory for sale versus the demand for housing in the Birmingham housing market has definitely favored buyers. It’s been a buyers’ market. With the rising demand for housing, which has been on the rise for the past 17 months (since October 2011), and a shrinking inventory of homes for sale we are now experiencing a swing of the market that gives sellers more control than they have seen in years.
Now let me be clear, as I have said many times here, there are literally hundreds of markets in the metro Birmingham market (Jefferson, Shelby and St. Clair counties) and each market has its own set of dynamics. While the general trend currently favors sellers, there are some exceptions. Those exceptions will generally be in communities still heavily laden with foreclosures (most communities have seen a substantial drop in foreclosure activity) and those communities experiencing an exodus resulting from homeowners desiring to leave due to their feelings and assessments about the neighborhoods they live in.
This move to a sellers’ market is of course most noticeable for move-in ready homes in desired neighborhoods.
While this may sound like bad news for buyers, remember there have been huge price adjustments made since the height of the market in 2006. Home affordability is currently at its most favorable level and is likely to stay near that peak for the balance of 2013. Homes are still bargain priced but don’t expect huge discounts on livable homes, or for that matter, even livable foreclosures. Don’t be surprised if you are informed that there are multiple offers and you will are asked to give your highest and best offer in what amounts to a bidding war. It’s not unheard of for homes to sell a bit above list price in today’s market.
Sellers likewise need to be aware that the move to a sellers’ market while good news for sellers, does not mean that they can name their price or sell at a profit. The drop in market values from the 2006 peak is real and while prices are inching up, sellers are still four to six years away from the market values of 2006.
This gap in inventory and demand will further motivate builders to re-enter the market. We saw a substantial increase in builder activity in 2012, which shows no signs of slowing in 2013
. As new home inventories increase, this will add pressure on sellers to offer up-to-date, move-in ready alternatives to buyers.
All-in-all this is really good news for everybody. The return to a stable housing market is a most desirable state of affairs.
May the market be with you.