Market Normalization

The most common question I have been asked in recent weeks is, "Where did all the Buyers go?"

The Short Answer: Market Normalization.

The Long Answer: Buyers have gone nowhere. They are still here. They haven't left town in droves. There have been no large employers who have left our area; there have been no spikes in unemployment, no rises in interest rates, yet the number of showings on MLS listed properties are down across the board. So what has buyers holding back?

It's known as market normalization.  An analysis of local real estate sales going back to 2003 indicates that the housing market is simply returning to its old self again. Historically, people have always wanted to move by the time school is out in May. For those who miss that opportunity, they really really want to be moved by the time school starts up in September. It's the way the real estate market has performed for most of the past 30 years.

Why do we say, "most of the past 30 years" and not "every year"? The game changer known as, "The Great Recession."

Beginning as early as the second half of 2005, we saw inventory levels rising dramatically and sales numbers dropping equally as fast. Inventory levels rose from a low 3.5 month supply in late 2003 to a market high 18 month supply in January of 2008. That's right...right here in good old, stable Dane County, a supply of housing for sale that would last for nearly a year and a half without the addition of any newly listed properties.

So where are we now? With a current supply of approximately four months but lower activity levels, we seem to be back to where we were a decade or so ago in terms of supply and demand: A Normal Market. The good news in all this? In housing, as with the stock market, stability and predictability are good things. In housing, sellers can now better time their move and buyers know when to count on more choices becoming available.