The Real Reason Home Prices Are Increasing

Dated: 12/01/2017

Views: 11


The Real Reason Home Prices are Increasing

The Real Reason Home Prices are Increasing | MyKCM

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 1).

The Real Reason Home Prices are Increasing | MyKCM

According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes has been below six months for the last four years (see chart 2).

The Real Reason Home Prices are Increasing | MyKCM

Bottom Line

If buyer demand outpaces 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.


Feel free to like and share my blog post....

April Shackelford

Latest Blog Posts

How Much Do You Need To Make To Buy A Home

It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to

Read More

What Should You Look For In Your Real Estate Team

Bottom Line:In this world ofGooglesearches, where it seems like all the answers are just a mouse-click away, you need an agent who is going to educate you and share the information that you need

Read More

Boomerang Buyers Most Qualify For Financing In 2 3 Years

Bottom Line:If you are one of the millions of Americans who has filed for bankruptcy and think that you have to wait 7-10 years to make your dream of returning to homeownership a reality, let’s

Read More

House Prices Simply A Matter Of Supply Demand

Bottom Line:The reason home prices are still rising is because there are many purchasers looking to buy, but very few homeowners ready to sell. This imbalance is the reason prices will remain on

Read More