|Future House Values? Simple as Supply and Demand
Posted: 04 Mar 2013 04:09 AM PST
For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market, as it is in the markets for every other saleable item, will be determined by the concept of ‘supply and demand’.
According to dictionary.com:
In real estate, supply and demand is represented as the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).
While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:
What is happening across the country right now?
In most parts of the country, home values are rising. This is for two reasons:
This has resulted in a 4.2-month supply at the current sales pace which is the lowest housing supply since April 2005 when it was also 4.2 months.
Based on the table above, we can see that the supply/demand ratio is leaning toward a sellers’ market where prices will appreciate. That has created positive movement in housing values in most parts of the country.
When your real estate professional discusses home values, he/she should be prepared to show what the supply/demand ratio for homes similar to yours is in your area.