Do you remember the Law of Supply and Demand from economics class in high school? When supply goes down and demand goes up it equals higher prices, and vice versa.
In Real Estate, it’s considered to be a good and healthy year when there is about a six month of supply of homes on the market– meaning the total number sold in a month should equal approximately 1/6 of the available inventory.
If the inventory levels drop below six months, it is considered a seller’s market. If they rise above six months, it’s considered a buyer’s market. The national average is currently about eight months of inventory, creating an overall buyer’s market in America (no surprise there).
Boise, Idaho on the other hand is experiencing an odd phenomenon. Where it once had close to 16 months of inventory during the crash, it has now had under six months of inventory for most of 2011. Boise has even seen some year to date price increases from this inventory shortage, and is a market positioned to do very well in 2012.
This rapid reduction in inventory is happening in a few metro markets hard hit by the real estate crash, including parts of Florida, and Phoenix, AZ. However, some of these markets are seeing an early rebound only because they’re located in high demand areas for buyers and home prices are just too attractive to pass up.
Although Boise might not be as an attractive place weather-wise to live as Florida or Arizona, it is located in a state where the foreclosure process is much faster than other states. Therefore, the back log of foreclosures predicted to enter the market and hinder recovery in 2012 is not prominent here the way it is in larger states with more complicated foreclosure laws.
Boise is easily one of the hottest markets to watch in the coming year, and I think we’ll soon see the law of supply and demand at work with home prices rising to accommodate their rapid reduction in supply.
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