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 You May Want To Start Your Home Search Today
Inventory growth this year is certainly good news for you, especially if you’ve had trouble finding a home that meets your needs.
3 Tips for Buying a Home Today
No matter where you’re at in your homeownership journey, the best way to make sure you’re set up for success is to work with a real estate professional.
What Does the Rest of the Year Hold for Home Prices?
Despite what you’ve heard, experts say home prices won’t fall in most markets. They’ll just appreciate more moderately.
Is the Shifting Market a Challenge or an Opportunity for Homebuyers?
Today, data shows buyer demand is moderating in the wake of higher mortgage rates.
Why It’s Still a Sellers’ Market
While buyer demand is softening due to higher mortgage rates, homes that are priced right are still selling fast. That means your window of opportunity to list your house hasn’t closed.
3 Graphs To Show This Isn’t a Housing Bubble
It’s only natural for concerns to creep in that it could be a repeat of what took place in 2008. Today’s market is nothing like that.
Why Are People Moving Today?
While mortgage rates are higher than they were at the start of the year and home prices are rising, you shouldn’t put your plans on hold based solely on market factors.
A Window of Opportunity for Homebuyers
The housing market is still strong; it’s just easing off from the unsustainable frenzy it saw during the height of the pandemic.
What’s Causing Ongoing Home Price Appreciation?
Experts forecast ongoing home price appreciation thanks to the lingering imbalance of supply and demand.
Think Home Prices Are Going To Fall? Think Again
If you’re planning to buy a home, you shouldn’t wait for home prices to drop to make your purchase.