Orlando Real Estate

Supply and Demand, But Wait There's More

April 16th, 2012 3:50 PM by David W. Welch

Supply and demand still work like they always have, but they are effected by factors that may not always seem apparent. The concept of elasticity of demand, looks at a buyers willingness to stretch to pay a higher price. Back in 2005 demand was extremely elastic, meaning that even though prices were climbing higher by the month, buyers were still willing to buy. Today, we see that elasticity may not be quite what it was back then. Prices are climbing here in Orlando, but not as steeply as you might expect given the decline in inventory. Last month's median price was $115,000 which was up 12.7% year over year. The number of homes available for sale has dropped over 37.2% from last year's 12,549 to only 7,875 as of last month. There is only a little over a three month supply of homes available right now.

I have written before that supply is easy to figure out. Supply is just a number, such as 7,850 which is the number of homes currently available for sale listed by Orlando Realtors. Yes, you can break down that number a lot of different ways. There are so many REO's, so many short sales, so many single family homes and so many condos, but when you put them back together there are still the same number of properties for sale. Demand is a little tougher to measure. You can count the number of sales last month, which was 2,437 and say that was the demand for real estate in Orlando in March 2012. Hold on though, because there were over 3,800 new contracts written last month, so is that the true measure of demand? Wait, there's more. I just put a property on the market last week that received nine offers, and only one of those became a contract. If I recall, my last three listings received a total of 15 offers, but only three count as contracts. So, are the offers a better measure of demand? But wait, there's more still. Lending is very tight, and I speak with people almost every week that desperately wish to buy, but cannot obtain financing. You have to factor that demand into the equation some how too.

David Welch Real Estate Optimist, Orlando Real EstateSearch for Homes

Posted in:General
Posted by David W. Welch on April 16th, 2012 3:50 PM

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