We recently noted in our October real estate update that there are only 1.7 months of supply in the Madison housing market. We're expecting more of the same for the foreseeable future, and here's why:
New home construction is low.
Although there is a genuine need for more inventory, new housing starts remain about 50% below the peak levels from 2002 - 2005. One big reason for this is the last real estate downturn put many home builders out of business. With fewer builders in the marketplace, fewer homes are being built.
Housing starts for duplexes and single family homes have basically plateaued, as can be seen in this graph below. It's also important to note that new condo construction is at a virtual standstill and nowhere near the level needed to meet the demand in the marketplace.
Foreclosure activity is low.
Dane County foreclosures are at their lowest level since the year 2000, a sign of a much-improved economy. Distressed properties are no longer a significant source of supply in the Madison area real estate market.
Listing activity is low.
With fewer properties to move to, fewer owners are putting their current home up for sale. In effect we have a cycle of low inventory that's feeding upon itself. Single family home listing activity has basically plateaued...
Condo listings have plateaued, too...
More reasons supply will remain low
Dane County has the strongest economy and lowest unemployment rate in Wisconsin, and our population is growing faster than any other in the state. Inventory will remain low for as long as local businesses keep adding high-paying jobs to the economy. With strong demand, and low supply, the market will generally favor sellers over buyers in the months ahead.
Advice for sellers in a low inventory market
It's easy to get caught up in the headlines and list your property for an unrealistic price, especially during the holiday season. For some practical pricing tips, check out this article. And feel free to reach out to us anytime you have questions about pricing your home.
Advice for buyers
If you're serious about buying in this low inventory market, hire a full-service and full-time buyer agent. And be open to getting creative with your search. You'll find your dream home when you and your agent put a proactive and creative search plan in place.