It's going to be another wild and crazy year for real estate in 2017. Low supply will be the HUGE theme as the weather starts to warm. If you're serious about buying in 2017, you'll need to go "all in". The market is already playing its hand this year - and supply is trending lower. Here is some quick insight into the inventory trends at play in the Madison area real estate market.
Madison Single Family Home Inventory is Historically Low
Right now there are only 1.1 months of inventory in the Madison single family home market. Last year at this time there were 1.6 months. What's more, active MLS listings are down 20% from where they were last year. Almost one-third of the listings on the market right now are under contract (a very high percentage for January). Inventory is especially tight for homes priced under $400,000.
Madison Condo Supply is also Historically Low
As of this post there are only 1.8 months of supply in the Madison condo market - compared to 2.7 months a year ago. Active condo listings are down 19% from the same time last year. Inventory is very tight for condos priced below $250,000.
Why Supply will Remain Low in 2017
We know from being in the field everyday that there's a large pent up demand for real estate in the Madison area. And the cycle of low listing inventory is one that's feeding upon itself. For example, low condo inventory is making it challenging for owners of single family homes to downsize into a condominium. This means fewer single family homes are being listed for sale as down-sizers work to find the right condo.
Building more condominiums would be one great way to loosen up supply and satisfy some of the demand in the market. However, right now Madison area developers are focused on building new apartment buildings over building new condo communities (the brand new Starliner Condominiums are an exception).
More Reasons for Low Housing Supply
There are other factors at play which foreshadow low supply in 2017. These include a tight rental market, a decreasing supply of foreclosures, and a low influx of new construction homes.
A Tight Rental Market
Apartment supply is tight and rents remain high. And high rents are making home ownership more attractive. There are a ton of apartment dwellers in Madison who would love to stop paying rent and start building equity in 2017. Again, building more condominiums would be a great way to address some of the pent-up demand that's out there.
Fewer Foreclosures in the Pipeline
Just a few years ago distressed properties accounted for a significant share of the housing supply in the Madison area. Now foreclosures are trending along the lowest levels in the last 15 years. Note to flippers: foreclosures and short sales will be few and far between in 2017.
A Low Influx of New Construction Homes
New home construction has picked up from recession lows, but the pace is well below where it needs to be in order to satisfy the demand in the market. This post covers what's going on in the new construction market right now.
A New Normal for Madison Real Estate
Low supply is the new normal for Madison area real estate, and it will remain that way until more new construction homes and condos start entering the pipeline. If you're buying a home in 2017, make sure you have a good plan and a good agent to help you carry it out. If you're selling, your property may be worth much more than you think. Of course all real estate is local, and conditions can vary a lot by location and price point. Feel free to contact us anytime with questions about your local market.
This article is published courtesy of: Dan Miller, REALTOR Mad City Dream Homes & RE/MAX Preferred