What this week’s storm told us about housing prices in 2017

During Tuesday’s storm a tree came down on the roof of my house (fortunately the fall was cushioned and there was no damage to the house), but on Wednesday I wanted the tree removed before any further excitement. I contacted tree removal companies – and guess what? Yep, they were inundated with calls. So what happened to their prices do you think? Right again – they sky-rocketed, like Uber surge pricing on New Year’s Eve.

Both the tree removal and Uber pricing are examples of a simple economic law: that of supply and demand. In both cases, demand far exceeded supply and when that happens economic theory suggests prices rise. And they sure did on Wednesday!

Trees and real estate prices

What does this mean for real estate prices in 2017?
Well look at this chart, produced by the National Association of Realtors (NAR). Inventory has dropped year over year for 20 months in a row

Housing inventory

A mismatch between supply and demand can occur either through too much demand or too little supply – think of how OPEC used to keep oil prices high by reducing production – i.e. reducing supply.

Now look at the chart above. The dotted line represents 6 months of supply – the level at which house prices are regarded as being in equilibrium between buyers and sellers. If there is more than 6 months of supply, equilibrium swings in favor of buyers who they have plenty of choices and so can determine prices. But when, as for the last few years, supply is less than 6 months, equilibrium swings in favor of sellers. So what happens to prices? They go up.

Nationally, according to the Federal Housing Finance Agency, home prices in the last 5 years have increased by 5%, 7%, 5%, 6% and 6% – pretty consistent and steady gains.

Should I wait for a better time to buy?
I don’t think the issue is one of timing as much as finding the right house, as I expect house prices to continue to rise (supply and demand) while mortgage rates are also likely to head higher as the year progresses.

A lot of buyers are hoping that there will be new inventory come the spring. That should indeed happen and when it does there is likely to be a lot of competition, which is why it is important for buyers to put themselves in the best position to be able to buy. And that means using a buyer agent to work on your behalf.

If you are looking to buy, I will contact you immediately when a house that meets your needs is available. In this market you need to have somebody looking after your interests

If you are planning to sell read  Which broker should I choose to sell my house?

Please contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com for a free market analysis and explanation of the outstanding marketing program I offer

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty. Each Office Is Independently Owned and Operated

@OliverReports

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