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August 26, 2009

What a balanced housing market looks like

When will home sellers and buyers be on basically equal footing? When supply equals demand. The magic number, many housing experts say, is six.

As in, "it'll take six months to sell all the homes now on the market at the current pace of sales."

During the first half of the year, the Baltimore metro area's supply averaged 11.5 months.

"As that number approaches six, we'll start to see stabilization in pricing," said Kenneth Wenhold, director of the Mid-Atlantic region for Metrostudy, a housing-market research firm. "When Northern Virginia broke the six mark, we saw things change very dramatically in a very short period of time. ... They were at about 10.4 months two years ago, and it only took them about nine months to get down to a six months' supply."

Could that happen farther north?

"Hypothetically, the Baltimore market could be close to equilibrium, if not at equilibrium, by this time next year," Wenhold. "Northern Virginia has shown that is a possibility."

Northern Virginia has seen a more dramatic drop in prices, though, which could be driving buyers into the fray.

That's the resale picture. As for new homes, Wenhold says there's a 9.2-month supply in the Baltimore region. Condos are a big part of that. Counting just newly constructed single-family homes and townhouses, there's a "much healthier" 5.8-month supply, he said.

The new-home supply is more restrained than the resales because builders hit the brakes on construction when the housing market slumped, and kept those brakes on hard.

"They've been very good at limiting the amount of supply that's out there," Wenhold said.
Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (5)
Categories: Housing stats


Great article and assessment Jamie. That is a very interesting way to look at stability in the market even though Northern Virginia, given it's proximity to DC and stable job market, is a much different animal than Baltimore. These are the kinds of statistics that I like to pay attention to when looking for the market turnaround. Keep up the good work!

agree - this seems reasonable. Any idea when we last had a 6 month supply? (pre-bubble, that is)

Thanks, M! And Darwin Rules, that's a good question.

We had a five-month supply at the end of 1999. It was 4.2 months at the end of 2000, three months at the end of 2001 and 2.2 months at the end of 2002, to give you an idea of the trend.

This is calculating it the way Wenhold recommends, which is the inventory divided by the AVERAGE of sales in the previous 12 months. That way you don't have artificially low figures in the spring season (when sales spike) and artificially high numbers in the winter.

We just settled today on our house in Salisbury- finally sold it. We moved back to Baltimore area after my husband was laid off from his job down there in Oct. 2008. Our house was on the market just over 9 months. I know Eastern Shore is different from Baltimore area though. Our first realtor told us she expected it would take about 4 months to sell our house. Not sure where she came up with that, and it obviously didn't work out that way for us...

Agreed in full Jaime. Good thought with this one too.

Deirdre G

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
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