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Real Estate Market

What Do Supply and Demand Tell Us About Today’s Housing Market?

What Do Supply and Demand Tell Us About Today’s Housing Market?

There’s a well-known economic theory – the law of supply and demand – that explains what’s happening with prices in the current real estate market. Put simply, when demand for an item is high, prices rise. When the supply of the item increases, prices fall. Of course, when demand is very high and supply is very low, prices can rise significantly.

Understanding the impact both supply and demand have can provide the answers to a few popular questions about today’s housing market:

  • Why are prices rising?
  • Where are prices headed?
  • What does this mean for homebuyers?

Why Are Prices Rising?

According to the latest Home Price Insights report from CoreLogic, home prices have risen 18.1% since this time last year. But what’s driving the increase?

Recent buyer and seller activity data from the National Association of Realtors (NAR) helps answer that question. When we take NAR’s buyer activity data and compare it to the seller traffic during the same timeframe, we can see buyer demand continues to outpace seller activity by a wide margin. In other words, the demand for homes is significantly greater than the current supply that’s available to buy (see maps below):

August Buyer and Seller Traffic

This combination of low supply and high demand is what’s driving home prices up. Bill McBride, author of the Calculated Risk blog, puts it best, saying:

“By some measures, house prices seem high, but the recent price increases make sense from a supply and demand perspective.

Where Are Prices Headed?

The supply of homes for sale will greatly affect where prices head over the coming months. Many experts forecast prices will continue to increase, but they’ll likely appreciate at a slower rate.

Buyers hoping to purchase the home of their dreams may see this as welcome news. In this case, perspective is important: a slight moderation of home prices does not mean prices will depreciate or fall. Price increases may occur at a slower pace, but experts still expect them to rise.

Five major entities that closely follow the real estate market forecast home prices will continue appreciating through 2022 (see graph below):

Home Prices Forecast 2022

What Does This Mean for Homebuyers?

If you’re waiting to enter the market because you’re expecting prices to drop, you may end up paying more in the long run. Even if price increases occur at a slower rate next year, prices are still projected to rise. That means the home of your dreams will likely cost even more in 2022.

Bottom Line

The truth is, high demand and low supply are what’s driving up home prices in today’s housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise. If you’re a potential homebuyer, let’s connect today to discuss what that could mean for you if you wait even longer to buy.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

Let’s Connect:
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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Categories
Real Estate Market

Home Price Appreciation Is Skyrocketing in 2021. What About 2022?

Home Price Appreciation Is Skyrocketing in 2021. What About 2022?

One of the major story lines over the last year is how well the residential real estate market performed. One key metric in the spotlight is home price appreciation. According to the latest indices, home prices are skyrocketing this year.

Here are the latest percentages showing the year-over-year increase in home price appreciation:

The dramatic increases are seen at every price point and in all regions of the country.

Increases Are Across Every Price Point

According to the latest Home Price Index from CoreLogic, each price range is seeing at least a 19% increase year-over-year:

Home Price Appreciation Across All Price Points

Increases Are Across Every Region in the Country

Every region in the country is experiencing at least a 14.9% increase in home price appreciation, according to the Federal Housing Finance Agency (FHFA):

Home Price Appreciation Rising in Every Region

Increases Are Across Each of the Top 20 Metros in the Country

According to the U.S. National Home Price Index from S&P Case-Shiller, every major metro is seeing at least a 13.3% growth in prices (see graph below):

Strong Price Growth Across Each Metro

What About Price Appreciation in 2022?

Prices are the result of the balance between supply and demand. The demand for single-family homes has been strong over the last 18 months. The supply of houses available for sale was near historic lows. However, there’s some good news on the supply side. Realtor.com reports:

“432,000 new listings hit the national housing market in August, an increase of 18,000 over last year.”

There will, however, still be a shortage of supply compared to demand in 2022. CoreLogic reveals:

“Given the widespread demand and considering the number of standalone homes built during the past decade, the single-family market is estimated to be undersupplied by 4.35 million units by 2022.”

Yet, most forecasts call for home price appreciation to moderate in 2022. The Home Price Expectation Survey, a survey of over 100 economists, investment strategists, and housing market analysts, calls for a 5.12% appreciation level next year. Here are the 2022 home appreciation forecasts from the four other major entities:

  1. The National Association of Realtors (NAR): 4.4%
  2. The Mortgage Bankers Association (MBA): 8.4%
  3. Fannie Mae: 5.1%
  4. Freddie Mac: 5.3%

Price appreciation is expected to slow in 2022 when compared to the record highs of 2021. However, it is still expected to be greater than the annual average of 4.1% over the last 25 years.

Bottom Line

If you owned a home over the past year, you’ve seen your household wealth grow substantially, and you’ll see another nice boost in 2022. If you’re thinking of buying, consider buying now as prices are forecast to continue increasing through at least next year.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

Let’s Connect:
Facebook
Linkedin
Twitter
Instagram

THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.