Remember Economics 101? It was all about supply and demand and how the two ever-changing functions move the market of a particular product or service and ultimately determine the price. If supply is high and demand is low, prices tend to fall. If supply is low and demand is high, there are fewer sales (because there are fewer homes to sell) but upward pressure is put on prices.
That’s exactly what is happening in the local housing market. Right now in Lorton, (ZIP code 22079) there is a “supply” of 76 active listings, or homes for sale. This is a 65% decrease from levels seen just four years ago and it means that potential buyers have very few housing options from which to choose. There are certainly more buyers looking to take advantage of historically low mortgage interest rates and purchase a home than there are sellers in the marketplace. This is why we’re seeing properly-priced homes in good condition sell in a matter of days, sometimes with multiple offers.
Another barometer of market condition is the “Housing Absorption Rate”. This is calculated by taking the number of homes sold over a period of time (usually 12 months), and dividing that by the current number of “Active” homes on the market.
In Lorton, homes sell at a rate of about home per day. So, that means that we now have a 2.3-month supply. A six month supply is considered a “normal market” so our numbers indicate that we currently have an undersupply of homes available. Of course, there are other factors to consider when analyzing the real estate market. But sometimes it just comes down to simple supply and demand.
Ron Kowalski, of Ron & Susan Associates, is a realtor with with Re/Max Gateway in Lorton, VA.