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    Home Prices: It’s All About Supply and Demand

    Looking at the big picture, supply and demand will give us the clearest idea of what’s to come. Making our way through the year, we must pay attention to the supply of homes on the market. Keep in mind, the inventory of homes is going to vary by location and by price point. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Home Prices: It’s All About Supply and Demand | Simplifying The Market When the supply is low, you will see an upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item, which could prompt bidding wars and drive price points higher in the home sale process. In addition, experts forecasting home prices have updated their projections.. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the supply of homes. This could drive home prices even higher.Home Prices: It’s All About Supply and Demand | Simplifying The Market

    Bottom Line

    When the inventory is low, the value of homes typically increase because home buyers are willing to pay more.

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