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Home Prices are Increasing. Here’s Why.

There are many theories going around right now as to why home prices are currently increasing.

However, the simple explanation behind rising home prices is the lack of “For Sale” signs in front yards. This can be explained by the theory of supply and demand. When there is a small supply of something in high demand, prices go up.

According to the Existing Home Sales Report from the National Association of Realtors, the monthly inventory of homes for sale has been below six months for the last five years.

(Source: Keeping Current Matters)

Compounding the problem of lack of supply is that Americans’ wage growth is being left far behind, with home prices increasing at twice the rate of income growth.

Overall, GOBankingRates found that the average home price nationwide is $207,600. That’s up 6.68 percent from a year ago, and an average 5.91 percent per year over the past five years. Prices nationally are now 6 percent higher than their 2006 peak before the housing crisis.

High demand and limited supply have pushed home prices above where they were in early 2006. New construction are lagging behind historically normal levels, which leads to the upward pressure on prices.

If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. However, no need to panic just yet – this is normal market behavior for all industries. It is simply the theory of supply and demand working as it should.

If you are looking to buy or sell your home, give the Robinson Team a call. Remember, at any price in any neighborhood, The Robinson Team sells homes!

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