Yeah. You heard me. I quasi-quoted a Jay-Z song. Jay-Z, if you’re reading this, please don’t sue us. Does thinking there is a possibility of Jay-Z reading this Oklahoma-specific real estate school’s blog post mean that I could be suffering from delusions of grandeur? Probably. But that’s not the point. 

The point is that our inventory is low. That’s literally the entire reason I am writing this blog post. Well, that, and I need fresh content for the website so Google doesn’t forget about us in their search rankings. But mostly to talk about the low inventory. Or at least 50-50. 

So what does low inventory mean? To answer that, we’ll jump to the most basic of economic principles: Supply and Demand. Generally speaking, when supply goes up, demand goes down. Inversely, When supply goes down, demand goes up. Now, obviously, like anything, it is not entirely that cut and dry. There are a lot of nuances that could alter the path of either supply or demand and they are not always going to be directly tied to one another. 

But for the most part, they are going to dance pretty well together; like an economic depiction of Yin and Yang, one gracefully moving and thus forcing the other one to move away from it — push, pull, push, pull… You get the picture. 

Now another good question might be: Which comes first? The increase in demand because of the drop in supply? Or the decrease in supply because of the increase in demand? These questions are similar to the old question about the chicken or egg and the endless debate as to which came first. (The chicken. Probably. Or maybe the egg. I don’t know.)

How about this, let me pose an even better question: Does it really matter? 

I’m not trying to be pedantic, here. Seriously. Does it matter which comes first? And just to be clear, I’m referring to supply and demand again (not the chicken or its egg). 

If you’re just a normal person that is buying or selling a house, and not a statistician who works for some real estate-based data-harvesting company, then the answer to that question is a resounding “NO.” To a buyer who is wanting to buy a house, it does not matter why inventory is low. The only thing they really care about is that inventory is low. 

Now that we know that the inventory is definitely low, let’s discuss what that means. For a buyer, it means that they’re going to have to be extremely diligent in their search for the perfect home. It also means that they’re going to have to be ready to pay more. They’ll likely have to end up competing against one or several other buyers when they finally do make an offer. 

When you have more buyers than you do inventory, it becomes kind of similar to a stressful game of musical chairs. But instead of a dwindling number of chairs and players, imagine only a dwindling number of chairs. And instead of chairs, imagine these as houses that are for sale. 

If you played a game of musical chairs that started with 9 chairs and 10 players, and every time the music stopped and the players rushed to a chair, with the odd man out watching the 9 seated players—but as a unique twist, you didn’t remove the odd man out—then you’d start the next round with only 8 chairs and still 10 players. This is what is happening in Northeast Oklahoma, right now. As you could imagine, a game like that could devolve into some pretty desperate players (buyers) pretty quickly.

We know what it means for a buyer, now. And it sounds like it’s kind of scary for them! But what does it mean for a seller? Well, for a seller, it’s kind of like winning the lottery. If we have a steady or increasing number of buyers but a dwindling amount of inventory, then we see a power shift over to the sellers. (Because demand increases as supply decreases, right? Do you remember that? Please tell me you remember that. We literally just talked about it.) 

When I say “power shift,” I’m not referring to an increase in superhuman abilities or the tipping of power in the House of Representatives. What I’m referring to, is the sellers’ “saleability” and negotiating power. When inventory is low, and demand is high, sellers get closer to their asking price, faster. This means that the buyers, if they really want the house, kind of have to play by the seller’s rules (to an extent; obviously not all houses are created equal). 

What amount of inventory for a market is considered low? This really depends on your market. To provide an example, though, in my market (Tulsa, OK MSA), our end of month inventory June of 2016 was right at 8,207. This includes all types of listings in all price ranges (residential, commercial, vacant land, etc.). This number has been pretty slowly and steadily moving down since the mortgage crisis recovery 6 or 7 years ago (June 2016 – 8,207, June 2017 – 8,005, June 2018 – 7,904, June 2019 – 7,319).

Our end of month inventory for June of 2020? 4,104. 


That was not a typo.

2016 – 2017? 2.5% drop.

2017 – 2018? 1.3% drop.

2018 – 2019? 7.4% drop.

2019 – 2020? 43.93% drop.

2016 – 2020? 49.99% drop.


I know a lot of real estate agents will always say, regardless of the market conditions, “WE NEED LISTINGS.” But hopefully, this has painted a true enough picture for you to understand that we do, in fact, NEED LISTINGS.

Those were some pretty shocking numbers. I know. So the natural line of questioning would dictate that we now speculate as to why? And I can assure you, that is all you will hear from me on the reasons behind such shocking decreases in inventory: speculation.

I would postulate that the reason for this insanity is multi-fold: COVID-19 (In case you don’t know what that is, it’s a virus. And if you need help knowing what other stuff is, like the internet, or an automobile, I’ll gladly assist in that, as well.), extremely low interest rates (like, “2.5%, fixed, 30 years” low), election year is among us, murder hornets have made their dastardly entrance onto the world stage, a squirrel was found in Colorado with the Bubonic plague, there’s an international child sex-trafficking ring under investigation, and that’s just the stuff that we know about!

Despite everything I’ve just rambled about concerning low inventory, our increase in average sales price from 2016 – 2020 is only at 17%. I know what you’re thinking. “Only 17%? That’s the difference between a $200,000 house and a $234,000 house!” I know. But to be fair, that’s a five-year difference. On average, values increase 3% every year. So considering how low inventory is, that’s not that crazy. 

And let’s not forget what’s happened to average interest rates during this same period. According to Freddie Mac, the Government Sponsored Enterprise (GSE), secondary-market behemoth, the average mortgage interest rate for a fixed, 30-Year mortgage, as of June of this year, is 3.37. 

{{Now, keep in mind, this is a rolling average and will vary from month-to-month. It’s also worth considering that, historically speaking, The Federal Reserve does not typically increase discount rates (the cost of money for member banks and the number that ultimately affects consumer-facing interest rates) before an election during the election year. And June is currently sitting at 3.16 and has consistently trended down from 3.62 in January. So it’s not unreasonable to guess that the number after December will very likely be less than 3.37.}}

So, through June of this year is at 3.37 (and trending to sub-3 territory), and this is down from 3.94 in 2019, 4.54 in 2018, 3.99 in 2017, and 3.65 in 2016. Let’s compare the difference for a buyer’s buying power in 2018 vs right now. 4.54 vs. 3.16. There’s this rule that I will talk about in more detail in another blog post, but it’s called “The Rule of 10X.” In short, it implies that for every percentage an interest decreases or increases, their buying power (or purchase price) decreases or increases by 10%. 

For example, let’s say a buyer can afford $1,200 per month. Total: Principal, Interest, Taxes, Insurance (PITI), the four contributing elements of a mortgage payment. In 2018, with a 4.5% interest rate and assuming 5% down (typical amount for a conventional loan), 1% for insurance, 1% for taxes, and .40% for PMI, they could have afforded roughly a $175,000 house. 

Now let’s compare that to June of 2020: 3.16%. That same buyer decided to wait and they just got locked in at a 3.125% rate. They can still afford $1,200 a month and all other items remain the same from the above scenario. But now, because of the decrease in interest rate, they can afford a $200,000 house. That’s 12.5% more! And remember earlier when I quoted a 5-year value increase of 17%? Well, 2018 was only 2 years ago. Since then, Values have only increased 7.7%. 

So that means, because of the lower interest rates, and despite an increase in value, you can still get more house for the same money. 

As Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t… pays it.”