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

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

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):What Do Supply and Demand Tell Us About Today’s Housing Market? | MyKCMThis 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):What Do Supply and Demand Tell Us About Today’s Housing Market? | MyKCM

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.


Posted on October 12, 2021

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    HOT HOMES ON THE MARKET 🔥🏠

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    COMING SOON | 🏠 34 Zephyr Road Palmyra VA 22963 | MLS #666386 | $375,000 | 🛏️ 3 bed 🛁 2 full bath | 🎉 OPEN HOUSE Sunday, July 13th from 11 AM - 1 PM!

Elegant light-filled ranch in a prime Lake Monticello location with outstanding curb appeal! This upscale split-bedroom floor plan features multiple rooflines, oversized Palladian windows, vaulted ceilings, and hickory hardwood floor. The spacious living room includes a gas fireplace and opens to the kitchen with granite countertops, maple cabinetry, a breakfast bar, and an eat-in area, plus a separate formal dining room.

The primary site offers vaulted ceilings, hardwood flooring, a large walk-in closet, double vanities, and a walk-in glass-enclosed shower. Additional bedrooms are located on the opposite side of the home for privacy. A vaulted sunroom overlooks the fenced backyard and mature landscaping. Additional features include a side-load garage, paved driveway with extra parking, and established plantings.

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    COMING SOON | 🏠 1025 Bristlecone Lane Charlottesville VA 22911 | MLS #666383 | $425,000 | 🛏️ 3 bed 🛁 3 full bath | 🎉 OPEN HOUSE Sunday, July 6th from 1 PM - 3 PM!

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