Why Are Home Prices Rising So Sharply

U.S. home prices have slowly been rising, but September had the highest rate of rise. The Standard & Poor’s/Case-Shiller 20-city home price index, increased 5.5 percent Why Are Home Prices Rising So Sharplyin September compared with a year ago which is the largest annual gain since August 2014. There are a few reasons for this.

One of those reasons is gains in the job market

The unemployment rate has fallen and people are slowly getting back to work. Marry that with historically low mortgage rates and borrowing costs that are below 4% and buying a home has become a bit easier. The Denver area has the second highest increase in home prices. It makes sense given the great job market.

Another reason is lack of inventory

Sales of existing homes have been all over the place this year, prices going up and down. Overall, though, home sales increased 3.9% the number of available homes fell 4.5%. Supply and demand is the basic economic reason for increases and decreases in prices of goods and services. Home sales are no different. If there are less homes to be purchased the prices for those homes will naturally rise. If there is a glut of homes, prices will fall. In October prices rose the steepest, just about 6%. That isn’t a good thing, necessarily, because of the state of the current economy. Prices are rising at more than double the pace of inflation and much faster than wages. That means many families are priced out of the market,. It also means that the rents they have to pay NOT to buy are increased as well.

Sellers

Sellers are holding onto their homes for a few different reasons as well. One is lack of equity. While home prices are improving, those who were underwater on their mortgages are finding their equity is low. Additionally a lot of homeowners refinanced homes at rates lower than the current, albeit low, rates. Why trade up to a higher rate?

Speak Your Mind

*