Home Price Appreciation Is as Simple as Supply and Demand


Home Price Appreciation Is as Simple as Supply and Demand | MyKCM

Home price appreciation continues to accelerate. Today, prices are driven by the simple concept of supply and demand. Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.


Let’s use three maps to show how this theory continues to affect the residential real estate market.

Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:

Home Price Appreciation Is as Simple as Supply and Demand | MyKCM

Map #2 – The change in state-by-state inventory levels year-over-year reported by realtor.com:

Home Price Appreciation Is as Simple as Supply and Demand | MyKCM

The reason prices continue to accelerate is that housing inventory is still at all-time lows while demand remains high. However, this may be changing.

Is there relief around the corner?

The report by realtor.com also shows the monthly change in inventory for each state.

Map #3 – State-by-state changes in inventory levels month-over-month reported by realtor.com:

Home Price Appreciation Is as Simple as Supply and Demand | MyKCM

We’ll know for certain as we move through the rest of the year.

Bottom Line

Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels.

I love homes, I love pugs, I love life.

Realtor - Luxury Homes, Starter Homes (and everything in between)

Compass

Beverly Hills, CA

949.264.2426

Born with a passion to help people buy real estate. Sarah Scheper loves homes, loves life, loves helping people "buy low, sell high."

 

She is all about helping people to improve their lives -- with real estate as the tool. She recently hired the best assistant in America -- her dog Beverly! Together, they will find you a great deal in a dog-eat-dog world out there. 🙂

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