The Recovery “Staircase”

By
Real Estate Agent with Remax Excellence - Silver Spring, MD Maryland #318884

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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Rainmaker
634,306
Stephanie/Bob The Ruiz/Miller Team
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Emcee, I agree with your analysis and price & inventory assumptions.  Same here in Florida.

Jul 03, 2012 10:07 AM #1
Rainer
76,817
Jay Jones
Keller Williams Tri-Lakes - Branson, MO

This sounds very much like what we're seeing here in Branson, MO. It's about time! Nice post and best of luck to you in 2012!

Jul 03, 2012 10:21 AM #2
Rainer
6,132
Victoria Winters
Caravelle Realty Group - Laguna Beach, CA

Hello Emcee,

Thank you for the economics lesson.  It was a lot more interesting than the classes I took in college.  All kidding aside, I very much appreciate your optimistic point of view in the midst of so much negative press regarding the state of real estate and the economy in general.  Out here on the west coast we are slowly beginning to see the turn around.  Any move "UP" is noteworthy and good news! 

Have a wonderful 4th of July and continued success for the remainder of this year.

Jul 03, 2012 01:47 PM #3
Rainer
45,434
Jill Kipnis
Move, Inc. - Westlake Village, CA

Emcee, thanks for mentioning the Realtor.com data. In fact, in May 2012, Mongtomery County's total inventory was 4,014 (including single family homes, condos, co-ops and townhomes), which was a more than 17% decrease compared to May 2011. At the same time, median list prices increased more than 13% year-over-year to $419,000. These factors together are positive signs that your market is stabilizing and moving toward a path of recovery, like what is happening on a national basis and in many other local markets.

Jul 05, 2012 09:04 AM #4
Rainmaker
684,508
Kay Van Kampen
RE/MAX Broker, RE/MAX Solutions - Springfield, MO
Realtor®, Springfield Mo Real Estate
Emcee, glad to hear prices in your area are increasing due to lower inventory. Ours is still seeing too much on the market.
Jul 05, 2012 06:35 PM #5
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Rainmaker
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Emcee M. Arah

Realtor w/Architectural Dimension, CRS, CDPE, CIAS
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