Why Home Prices Are Increasing
There are many unsubstantiated theories as to why home values are continuing to increase. From those who are worried that lending standards are again becoming too lenient (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.
However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase.
It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything more than seven months will cause prices to depreciate (see chart below).
According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).
If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.
Take advantage of more inventory coming to market in the Spring to find your dream home!
Going forward…It appears the homeownership rate will continue to increase.
As an owner, your mortgage payment is a form of ‘forced savings,’ which allows you to build equity in your home that you can tap into later in life.
Real Estate might be the safest, steadiest and simplest way yo build wealth in America.
In fact, by the time college grads reach their 30s, those with student loan debt have a homeownership rate nearly identical to those who didn’t take out loans.
The belief among the vast majority of Americans is that purchasing a home still remains a major step toward accomplishing the American Dream.
Not all buyers are looking for a newly built house! There are many buyers looking for “the charm and uniqueness” of an existing home.
Having a professional who’s been there before to guide you through the process is a simple step that will give you a huge advantage!
The cost of purchasing a home today is a bargain compared to previous generations when we look at it from a percentage of income basis.
Pricing your home at or slightly below market value actually increases the number of buyers who will see your home in their search!