When Will The Home Sellers Market Change?

Much of the real estate news this year is about continued increases in home prices, bidding wars and home value appreciation we have not seen since pre-recession times. The basis for the rally in the real estate market is on the shoulders of a low supply of housing. In economics 101 we learned price increases as supply decrease and demand remains constant. In today’s real estate market price is increasing due to a limited number of homes, but that will not last. Markets move to equilibrium. As profit returns remain high in home construction, existing home builders will build more homes and new homebuilders will join them.

No better metric illustrates a move to market equilibrium than new single family permits and single family new construction starts. As you can see from this chart, new home construction starts is at 781,000and continues to increase. Although the leading indicator is nowhere near the1.7 million home starts in 2005 we can expect new construction permits and construction starts will continue to increase until supply is more in line with demand. My prediction is the market will start to cool as interest rates near 6percent and new construction starts reach 1.0 million single family homes.

In the meantime, if you are needing to or have thought about selling your home, now is the time to act. We are in a home seller’s market which means you can ask for top price and terms that meet your needs.