The Real Reason Home Prices Are Increasing

Dated: 01/12/2018

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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).

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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 | Keeping Current Matters

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.

Lets look up your Homes True Value.

When you call me or go to my Web Page  I will give you a FREE NO OBLIGATION  Comparative Market Analysis of your Homes True Value according to what is currently selling in the Market. I look at what your competition is and what has sold.
I am seeing huge jumps in Home Selling Prices in my surrounding areas compared with three years ago. I just did a Market Analysis in the area and the Home Values are on the rise.The numbers tell the truth.
It never hurts to keep an eye on your Home Equity.

If you are in the Market to Buy a Home, I wouldn't straddle the fence too long it could end up costing you more in lending fees, interest rates and home prices could increase before you make the decision to start.  
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