Tag Archives: #supplyanddemand

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

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 of both supply and demand can provide 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.

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.

The truth is, high demand and low supply are what’s driving up home prices in today’s Cape Cod housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise.

As we mentioned in our previous post, we were in Dallas last week attending Success Summit 2021 sponsored by the Tom Ferry organization. Ferry is the leading real estate coach and trainer in the country. We’ve been participating in individual business coaching and Ferry events for several years.

We have a lot of information to review, but one take away is the lure of discount realtors, who appear to offer sellers lower fees than traditional real estate brokerages. It’s important that sellers hoping to save money look beyond commission and be sure they understand the additional monies that can be charged — like fees per showing and open house or for advertising– which can push final costs to equal or more than a traditional commission.

As always, we’re happy to answer your questions about the housing market. We can connect at 508-568-8191 or msennott@todayrealestate.com.

Have a great week…

Mari and Hank

What Does Price Appreciation Mean?

When you hear the phrase home price appreciation, what does it mean to you? Through context clues alone, chances are you know it has something to do with rising home prices. And as a seller, you know rising home prices are good news for your potential sale.

But let’s look past the dollar signs and dive deeper into the concept. To truly understand home price appreciation, you need to know how it works and why it matters to you.

Investopedia defines appreciation like this: “appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand, a weakening of supply, or as a result of changes in inflation or interest rates.”

When you consider the definition and how it applies to real estate, a few words stick out: supply and demand.

In today’s real estate market on Cape Cod and elsewhere, we’re experiencing high buyer demand and not enough sellers listing their homes for sale. No matter the industry, anytime there’s more demand than supply, prices naturally rise.

According to Quicken Loans, the national average home price appreciation rate is between 3-5% in a typical year. Today, home prices have been appreciating well beyond the norm thanks to high demand. Here are the latest expert projections on the rate of home price appreciation for this year (see chart below):

A Look at Home Price Appreciation and What It Means for Sellers | MyKCM

Compared to the normal pace of 3-5% appreciation per year, the current forecast of nearly 11.5% nationally is significant.

Across the Cape, the median sales price for a single family home (YTD) is up 30.4% from $461,000.00 to $601,000.00.

For sellers, this means that with the current rise in prices, your house may be worth more than you realize. Price appreciation helps give your equity a boost. Equity is the difference between what you owe on the home and its market value based on factors like price appreciation.

It works like this (see chart below). You can use your built-up equity to power a move into your dream home, or you can put it toward life-changing goals like funding an education or opening a business.

A Look at Home Price Appreciation and What It Means for Sellers | MyKCM

But — and this is important — while price appreciation is strong now, those same experts say it’ll start to appreciate at a more normalized pace next year. If you decide to sell sooner rather than later, you’ll be in a better position to capitalize on the higher-than-average home price appreciation we’re seeing today.

This morning at our virtual office meeting, we talked about how some sellers entering the market now may be disappointed that offers are not coming in at the head scratching figures over list price that they were a few months ago. One story was told of sellers, who received an offer at asking and countered $50,000.00 higher!

So, is it time to make your move? We’d be happy to help you review your options. Helping our clients make the best decisions for their individual situations has been our full time job for 22 years. Let connect at 508-568-8191 or msennott@todayrealrestate.com.

Talk soon…

Mari and Hank