Have you Seen our 3rd Quarter Market Report?
Learn

Have you Seen our 3rd Quarter Market Report?

Learn
Do you want content like this delivered to your inbox?
Share
Share

Why Home Prices Are Increasing

Anthony D'Alicandro

Anthony is a licensed Real Estate Broker in NJ & PA...

Anthony is a licensed Real Estate Broker in NJ & PA...

Sep 30 2 minutes read

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).

Why Home Prices Are Increasing | MyKCM

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).

Why Home Prices Are Increasing | MyKCM

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.


House Prices: Simply a Matter of Supply & Demand

The reason home prices are still rising is because there are many purchasers looking to bu...

Read More

 

Read our Latest Absorption Report

May 2018 Absorption Report

We use cookies to enhance your browsing experience and deliver our services. By continuing to visit this site, you agree to our use of cookies. More info