A topic of discussion here over the years has been that of pent up supply. The theory being that when the market stagnates or declines for a long time, people that want to sell but don’t immediately need to will hold off on listing to wait for a better price. You see a lot of these kinds of opportunistic sellers in down markets, with places priced too high on the market that end up languishing for months before being pulled. Once the market picks up, you would expect years worth of these sellers to come out of the woodwork and pile on the new listings.
But is that actually true? Let’s take a look at listings compared to market conditions and see.
Surprisingly it doesn’t seem like new listings are influenced much by market conditions. Listings are all over the place both in buyers and sellers markets. Maybe there is a slight trend towards more listings in hotter markets, but the data is so variable there really isn’t any way to tell for sure. That said, the primary factor behind listing volume is the season, so any influence of the market conditions might be getting lost in the bigger signal.
So let’s take a look at simple listings over time and compare it to the change in valuations.
Now we do seem to see a relationship, albeit with a significant time lag. Unfortunately we only have listing data for one real estate cycle, so it’s not exactly the strongest of evidence, but in the 2000s run-up, new listings started to seriously increase about 3 years after the market started picking up. Looking at our current market, we might still be in for a bit of a wait until the average seller clues in to the change in market conditions and lists their house. Then again, now that HHV exists, people might figure it out faster…