Why US real estate prices are going up

The last few years have witnessed the steady rise in the housing prices in the United States. Multiple reasons exist for this phenomenon, including the notable low housing prices post Great Depression and the prevailing low mortgage rates. The upswing of prices has been mirrored in S&P Core Logic Case-Shiller National Home Price NSA Index. Further analysis reveals that there is one another circumstance that has contributed to the rise in price growth.

The other circumstance is simply a lack of houses for sale. House demand is on the rise but inventories are getting progressively lower. The result is an uptick in price. It is vital to understand that monthly total housing volume has kept at the same level from April 2015. Due to this, although there is a rise in demand for houses on sale, the inventories of houses are going down. This can be easily gauged by comparing New One-Family Houses Sold and Monthly Supply of Houses. 

Housing has strong demand according to the buyer traffic index. If one goes by this index, the number of houses available for sale will not be adequate to quench demand. It follows that inventories related to homes for sale will not be sufficiently replenished from traffic by the seller. Adding to the equation is the factor of tight inventories. These have led to increase in offers linked to homes. This is yet another factor which indicated housing demand growth and the lowering of the inventories.

When factors like high demand related to houses and the noticeably absence of signs related to housing inventories growth rate are considered, it can be surmised that the price of real estate can only move up. Experts hold the opinion that there will be no abatement of the rising real estate prices until there will be an increase in the number of building permits and consequent housing. If the average period of time from the beginning of construction to completion of time is considered, then it is obvious that the inventory situation will remain unchanged for a minimum of 5.5 months. 

Not all places in the United States, however, are the same. Barry Sternlicht of Starwood Capital Group says that Greenwich in Connecticut could have the worst housing market with the United States. The town, located approximately 30 miles distant from Manhattan, is the place where the maximum numbers of hedge funds are located. The city with the biggest hedge funds collection is suffering a glut of houses and steadily lowers.

Leave a Comment