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).
Bottom Line
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.
Why Now Is Still a Great Time To Sell Your House
Nationally, demand is still high compared to the last normal years in the housing market and plenty of buyers are making moves right now
If Your House Hasn’t Sold Yet, It May Be Overpriced
With today’s higher mortgage rates already putting a stretch on their budget, buyers are being a bit more sensitive about price.
The Perfect Home Could Be the One You Perfect After Buying
Take a close look at your wish list and considering what features you really need in your next home versus which ones are nice-to-have.
Why You Need To Use a Real Estate Agent When You Buy a Home
When it comes to buying a home, there are a lot of moving pieces. That’s why the best place to start is connecting with a real estate agent.
When You Sell Your House, Where Do You Plan To Go?
Working with a real estate agent throughout the process is mission-critical to your success. They’ll help you explore all of your options.
Experts Project Home Prices Will Rise over the Next 5 Years
Experts project home prices will continue to rise across the country for years to come at a pace that’s more normal for the market.
Are The Top 3 Housing Market Questions on Your Mind?
When it comes to what’s happening in the housing market, there’s a lot of confusion going around right now.
Is Wall Street Buying Up All the Homes in America?
Are institutional investors, like large Wall Street Firms, really buying up so many homes that the average person can’t find one?
Are There Actually More Homes for Sale Right Now?
If you’re looking to buy, you may have slightly more options than you did in recent months, but you still need to brace for low inventory.
Is Your House the Top Thing on a Buyer’s Wish List this Holiday Season?
Anyone shopping for a new home between Thanksgiving and New Year’s is likely going to be a serious buyer.