The Recovery “Staircase”

In economics, we learned to associate the movement of the economy with an inverted bell curve.  This curve started with profitability (ie. the 2005 housing market) and then sloped downward into a recession, bottoming out a depression, sloping back up into recovery…and so on.  This u-shaped recovery seems good enough in theory, however, the Great Recession has proven to be far less smooth.

One of the major components affecting recovery is the relation between negative equity and low inventory.   According to Realtor.com, the total amount of active inventory in the US (consisting of single family homes, condos, townhomes and co-ops) in May stood at 1.88 million units.  This is 20.07 percent less than a year ago and well below its peak of 3.10 units in September, 2007 (which is when Realtor.com first began tracking this data on the national level).  What little bit of inventory there is – especially of the distressed nature – is being snatched up almost as soon as it hits the market in Montgomery County, MD and around the nation. 

The benefit of this inventory drought is that it is driving up the prices of homes.  This is where the staircase theory comes into play.  Stan Humphries, chief economist at Zillow, pointed out the fact that many homeowners are underwater, making it impossible for them to sell or buy at the present time.  However, as the inventory shortage continues to increase prices, these homeowners will no longer be upside down and find themselves in a position to sell.  More sellers means more inventory, but this inventory increase will be temporary and cause a price plateau.  After time, demand will eventually catch back up and home prices will resume their climb.  This series of repeated actions will create a “staircase” recovery as opposed to the more traditional “u-shaped” recovery.

Fortunately, being in the DC metro area has the great advantage of staying ahead of the national real estate market trends.  Recovery has already begun and home prices are continuing their ascent.  If you are interested in selling your Montgomery County, MD real estate before prices plateau, contact Emcee Arah of the EMA Real Estate Group online or by calling 301.452.5252.  Emcee is both a Certified Investor Agent Specialist (CIAS) and a Certified Distressed Property Expert (CDPE). 

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