What is a good indicator of supply and demand in the residential real estate market?

A strong indicator of supply and demand in the residential real estate market is the vacancy rate. This metric reflects the percentage of available rental properties or homes that are unoccupied over a specific period. A high vacancy rate typically suggests an oversupply of homes, indicating that there are more properties available for rent or sale than there are people looking to occupy them. Conversely, a low vacancy rate signals a tight market with high demand, as more homes are being occupied than are available. This relationship between vacancy rates and market conditions helps agents, investors, and buyers assess the balance between supply and demand, guiding their decision-making in real estate transactions.

Average home prices can also reflect supply and demand dynamics but may be influenced by various external factors, such as economic conditions and interest rates. New construction permits indicate future supply trends but do not directly measure current market conditions. The foreclosure rate can indicate economic distress but does not strictly represent supply and demand dynamics in a healthy market. Thus, the vacancy rate serves as a more direct indicator of the current state of supply and demand in residential real estate.