Paper Towels, Computer Chips And Eggs.....
To anyone who is trying to better understand the current economic climate and the 'big picture', paper towels, computer chips and eggs all have a few educating aspects in common:
1.?They all experienced a surge in demand, fueled by a 'shock' ....and a shortage of supply. Paper Towels were scarce during COVID as retailers had kept inventories lean. Computer chip inventories were also kept low pre-Covid and then new pent-up demand delivered shortages combined with?supply-chain disruptions. Egg-supply recently experienced a massive wave of bird flu. Now wholesale prices have plummeted by 50%.
2.?They all surged in pricing as they faced high demand....then further fueled by INCREASED demand by those hoarding.
3.?They all ramped up production.
4.?Pricing came down. And further down.
5.?All proved that increasing SUPPLY is the surest way to lower pricing.
6.?All proved that limiting supply makes pricing SURGE.
7.?All proved that making things close by, being better prepared for 'shocks',?and stocking up can be helpful to avoid future supply disruptions....and price surges.
领英推荐
Now let's bring this back to housing.....?
I probably don't need to say it again, but even though at this very moment many buyers are pausing and nervous and anxious about markets, the smartest investors of the world are?not?focused on headlines: instead, they focus on fundamentals.
And the KEY fundamental of all pricing boils down to one thing:?what does the SUPPLY side of things look like??If you want to buy a 2-bedroom condo, how many are available, and how many are currently under construction? How many more can be built in your area? How much does it cost to build/replace what you are looking at? What is the demand for this sort of property? How is it priced relative to similar properties? How does its condition and monthly operating costs compare?
This week my team had to navigate an intense bidding war on a property, yes, even in THIS market..... What drove our buyers to bid up??We evaluated their options. How many more of this type of property was available? How many were on the market? How many more could be built? What is under construction in the area? CAN more be built in the area? Answering?these questions - while removing emotions - helps navigate these decisions.?
Pricing is mostly directly related to scarcity. The question should be: is the scarcity temporary - or transitory - or more permanent/long term?