Blog August 27, 2020

Why Do Housing Prices Rise?

Why do housing prices rise?

It’s simple economics. SUPPLY and DEMAND.

1st rule of economics: all resources are scarce!

Everyone agrees that natural resources/homes/products/etc. are scarce because they can take a lot of effort, money, time, or other resources to get, or because there seems to be a finite amount available.

In California, due to high population with a high demand for living space, and a limited supply of homes; housing prices tend to rise higher each year.

Remodeling/renovating/updating a home, appreciation, and rental units can bring the value up every year as well.

When the economy is going strong and unemployment goes down, housing prices tend to rise. In a strong economy, people feel more secure in their jobs and their ability to take on mortgage debt. They’re also more likely to get approved for that mortgage.

Recessions and other disasters can lead to lower prices.

Following recessions, home values can increase in some areas of the country because of strong demand and low supply, while other areas struggle to rebound. (Happening now)

Potential homebuyers shouldn’t focus on national trends, as prices vary between states and even neighboring cities.
* Low mortgage rates have an indirect effect on home prices, as consumers are willing to take on more debt when credit is cheap.

This leads up to making sure you have the best credit, good down payment, good job history, filed taxes, and pre-approval to buy the perfect home for you!