One sign of a recovering economy can be rising housing prices. After the Great Recession, from 2007-2009, which featured the bursting of the housing bubble, the housing market correction, and the subprime mortgage crisis, rising costs may seem scary rather than comforting. Many Americans still remember increasing housing prices as the last sign before the crisis to come.
Source:Joint Center for Housing Studies, State of the Nations Housing 2018
Why are Home Prices on the Rise?
To put it simply, supply is lower than demand. That means more buyers are competing for fewer existing homes. Right now, the rate at which new housing is being built has not caught up to the demand either.
Source: Open Door, Housing Market Trends 2019
How Fast are Home Prices Growing?
Home prices are growing more slowly than in recent years, but they are definitely still going up. The national inventory of homes for sale has not grown in over a year. With the increase in buyer demand due to low interest rates and hesitant sellers providing fewer newly listed homes that prices are only going to continue to rise in the near future.
What Does This Mean for Buyers?
Affordability is a big issue in housing right now. Thankfully, recent low rates are helping to offset some of the price growth due to low inventory. However, the market continues to gain strength and the Fed could raise interest rates at any time, squeezing buyers in an already tough market.
What Does This Mean for Sellers?
Right now, the housing marketplace is a seller’s market. Home sellers are relocating to less competitive housing markets to take advantage of the increased demand and inflated home values in their current area. Even home sellers who aren’t looking to purchase new homes still have options to benefit financially by refinancing due to low interest rates.
It’s easy to think that home prices rising may be a sign of another housing crisis, but the economy and housing market are growing much slower than the period leading up to the Great Recession with strong economic indicators across other financial sectors, the outlook for continued economic growth and stability is positive.
This means you should be aware of your financial goals and take action on buying or refinancing when the time is right for your situation.