DC’s inventory of homes for sale sat at 1,176 active listings in February. That number of listings amounts to a mere 1.67 months of inventory, well below the six-month benchmark for a balanced market and a number that is in in keeping with the low-inventory trend that has plagued the city’s housing market for years.
While the number of new listings coming on the market each month directly affects the city’s inventory, a little known metric is an equally critical indicator of the supply of homes for sale in DC.
Contract ratio compares the total number of homes under contract in a given period to the overall number of active listings. A higher ratio signifies an increase in contracts compared to supply. For example, a ratio of 1.2 means there are 1.2 listings under contract for every listing that is active. For five of the last eight quarters, the contract ratio has been above 1.0 in DC, which means that during those quarters, more homes have sold than have come online. To put that in perspective, from 2007 to the beginning of 2012, the contract ratio in the city hovered around 0.5, and never rose above 1.0.
“The bottom line is that not enough sellers are putting their homes on the market to match demand and not enough builders are constructing homes to meet demand,” Jonathan Hill, VP of Marketing & Communications with MRIS, a Bright MLS told UrbanTurf.
Tomorrow, UrbanTurf will cover a new report that examines how much the inventory of homes for sale has dropped in the DC region over the last five years.
- 24% of Homes For Sale in DC Are Priced Above $1 Million
- DC Area Home Prices and Sales Reach Decade-High Levels in February
This article originally published at http://dc.urbanturf.com/articles/blog/the_homebuyer_demand_metric_that_keeps_dcs_housing_inventory_low/12355
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