If you’ve been paying attention to the housing market at all this year, you know that home prices have been heading up, up, up.
Take the latest report from the National Association of Realtors which showed that the median sales price of existing homes rose to $253,800 in May. That’s up 5.8% year-over-year and the highest reading since last June ($247,000).
Given the steady climb in home prices, it’s only natural to wonder what the underlying cause is.
What Causes Home Prices to Rise
Supply and Demand
When it comes to home prices and what causes them to rise or fall, it all comes back to the basic economic principle of supply and demand.
When we’re talking about the housing market, demand refers to the amount of homes desired by buyers, while supply refers to the amount of homes available on the market.
When demand rises and supply shrinks, that’s going to cause home prices to shoot up, as it breeds fierce competition among buyers.
As Debbie Drummond, a seasoned Las Vegas Realtor, points out:
“A recent Zillow report had Las Vegas’ median home price 10.2% higher than last year which beats the national average of a 7.4% increase. Our prices are being driven up by a lack of inventory. Current listings in the MLS are less than a two month supply of homes. Homes that are in good condition, in desirable neighborhoods, and priced right are selling quick.”
That’s a story that’s being repeated around many parts of the United States right now. In economics, the current situation is what is called “excess demand”.
Unfortunately for buyers, without an increase in the amount of homes for sale, home prices are destined to keep moving higher.
How high can they go, exactly?
Depending on what region you’re talking about, home prices could still have plenty of room to run. As Drummond told us:
“While our home values are appreciating we’re still 20-30% lower than our peak prices. Our economy is rebounding with unemployment at 4.8% in April. We have $15 Billion in major construction projects planned. This includes the new Football Stadium for the Raiders to occupy in 2020. With a vibrant economy and growing population, Las Vegas is likely to return to peak prices over the next 2-3 years.”
Las Vegas isn’t the only area with home prices that could see a sustained rise for many more months.
Take this recent article from the Orange County Register, which interviewed several economists and all of them stated that home prices haven another two or more years left to rise.
A quick google search reveals that this pattern repeats itself over and over again in Nevada, Nebraska, Texas, New Hampshire, and New York, just to name a few.
What Rising Prices Mean for Homeowners and Homebuyers
Find out what’s happening in your local housing market
It’s important to note that housing markets vary drastically from region to region. While home prices have been rising on average nationally, there are varying degrees of increases and even some places where home prices have fallen.
Figuring out what the situation is in your local housing market is a crucial first step in deciding what kind of action you should take.
NPR recently published an article with an interactive map that lets users see how home prices have fared in different parts of the United States. Take a look at the map to easily get an idea of what has been happening in your neck of the woods.
In all likelihood, home prices in your housing market have gone up and are poised to go even higher. With prices rising and inventory down, we’re seeing that many homeowners think right now is a great time to sell.
In fact, just last week the Fannie Mae Home Purchase Sentiment index for June came in at 88.3, which matches the all-time high set in February. According to the report, 39% of Americans said that right now is a good time to sell a home (a new record high) and 30% said that right now is a good time to buy.
Selling your home
So if you’re planning on selling your home right now, it’s very likely that you will have no problem find a buyer. Just make sure to be on the hunt for a house to move to before you list because it’s possible you’ll be done with the sale sooner than you think.
Buying a home
For anyone planning on buying a home, it you will probably get a better deal if you act sooner rather than later. Not only are home prices continuing to move higher, but mortgage rates are also rising.
Comments from the European Central Bank President triggered a massive global bond selloff a couple weeks ago and we’ve seen rates move up over ten basis points (one basis point = 0.01).
While the upward momentum is definitely there, the good news is that mortgage rates are climbing off of 2017 lows and are still at the lower end of the spectrum this year.
If you want to find out what your custom rate would be, you can fill out our online form here, or you can always call one of our experienced loan officers who can walk you through the same process.
from Total Mortgage Underwritings Blog http://ift.tt/2v9kl9U
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