Home prices are largely based on Supply and Demand.

• If demand outweighs supply, home prices rise
• If supply outweighs demand, home prices fall

It's good news for home sellers, therefore, that "used" homes for sale fell 6 percent nationally last month.  Less supply often means higher prices.

Of the 29 metropolitan areas tracked in real estate brokerage firm ZipRealty's survey, only Philadelphia showed an increase.

But the survey isn't perfect.  For example, it doesn't track the demand side of the equation -- buyer activity. 

Anecdotally, November and December are slower for buyer foot traffic than, say, March and April.  December's drop in supply, therefore, may reflect the expectation of reduced buyer interest.

In addition, the ZipRealty survey ignores the supply of newly-built homes, and of foreclosed properties.  In some cities, that can amount to a quarter-percent of the market supply or more.

And lastly, the survey addresses the nation and not the nation's neighborhoods.  This is an important distinction because real estate is not a nationwide market, nor is it even a citywide market.  Real estate is highly local and responsive on a neighborhood-level. 

National surveys rarely capture that point.

(Image courtesy: The Wall Street Journal Online)

www.TheMortgageMaven.com

Posted by Bring the Blog on January 13, 2009