What’s Driving the Increase in Home Prices?
There are 5 significant factors behind the increase in home prices as many real estate markets begin to see significant gains. The driving force, per the Wall Street Journal, is as follows:
1) Housing Affordability—housing affordability is bringing more buyers to the market that are looking to take advantage of historically low mortgage rates and homes prices in comparison to a few years ago.
2) The rise in household formation—household formation is expected to reach 1 million new households this year which his up from 570,000 over the last 5 years.
3) The increase in monthly rental expenses—has prompted more investors to purchase family homes for sale to rent out (and more renters to “2nd guess” why they are paying so much in rent when they could realistically purchase a home.
4) The decline in short sales and bank owned property—which has fallen drastically in 2012. Although distressed sales are still historically high, they have fallen from their peaks in most real estate markets. This helps to alleviate the downward pressure on homes prices.
5) Low Housing Inventories—housing inventories are at their lowest level in nearly 50 years. Builders have cut back on construction and numerous home owners must wait for prices to increase prior to placing their home on the market.
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