The KCM Blog - House
Pricing is Still about Supply and Demand
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Posted: 19 Aug 2013 04:00 AM
PDT
Knowing
how much inventory is for sale is crucial to determining where home values
are headed. Pricing of any item is determined by supply and demand:
how many items are available in relationship to how many want to buy that
item. The reasons for the strong year-over-year home appreciation numbers we
have been seeing is simple to explain: demand for housing is up and the
supply of homes for sale has been at historic lows. But that is beginning to
change.
The months’ supply of available
housing inventory, as reported by the National Association of Realtors,
has increased from 4.3 months this past January to the current number of 5.2
months. And it seems inventory will continue to increase as we move forward.
Last week, Realtor.com released
their National Housing Trend Report which
looked at the movement in inventory levels of homes for sale across the
country. Here are two major findings of the report:
1.) Dramatic
year-over-year inventory declines have evaporated.
Nationally inventories in July are only 5.24 percent below the
level of a year ago compared to being down 16.47 percent year-over-year in
January.
2.) Inventory declines
decrease in local markets.
The number of markets with
decreases in year-over-year inventory declined from 125 in June to 118 in
July. This suggests that fall inventories in some markets may return to
levels of a year ago.
In the report, Steve Berkowitz,
CEO of Move, Inc. explains the impact of these findings on home values:
The recovery is entering a
new phase where inventory shortfalls are no longer the driving force behind
changes in housing prices in many markets. Larger inventories, especially in
the hotter markets that experienced rapid price increases in the spring, are
expanding buyers’ choices and helping to moderate price increases.
Don’t get carried away with
recent news headlines when pricing your home. Let a real estate professional
explain what the above information means to the current value of your house.
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