Why Are Home Prices Still Rising?
Mikayla Jenkins
Recently, housing is in strong demand with limited availability. The reason why home prices are rising is because there are many purchasers looking to buy, but way fewer homeowners ready to sell. If this continues, prices will continue to rise. Housing inventory remains the most persistent factor affecting housing prices. There has been talk that media and politicians blame building costs, speculation, cost of living, interest rates, and mortgage rules. When the economy is well off, people want homes. Even though construction is strong, they are unable to keep up with the amount of people wanting to buy at this time. The rule of Supply VS Demand is simply driving home prices.
As you can see in the graph, in the last three months, there has been more buyers than sellers by far. With these results, the house prices will continue to rise until the supply increases dramatically.
The high home prices (8-15% year to year) started two years ago and are expected to expand for another two years. The interest rates are at an historic all time low which make people around our area want to buy a home at this time. Also, millennials who typically rent, are now wanting to be home owners which puts even a tighter squeeze on supply. Most families in the area are looking for middle class homes ranging from $300,000-$400,000. Dan Prothero says, “Which right now, there is a limited amount of houses in that price range and even when a house in that range is listed, there is typically an offer within 24 hours”. Overall, there is an abundance of demand which is currently overpowering the supply and will continue to do so for the next two years.
Works Cited:
Dan Prothero - real estate agent for Shorewest Elmbrook/Wauwatosa, 18, April. 2018
Simplify. “Buyer Demand Still Outpacing the Supply of Homes for Sale.” Simplifying the Market™, 26 Mar. 2018
Simplify. “House Prices: Simply a Matter of Supply & Demand.” Simplifying the Market™, 4 Apr. 2018,
Because of the higher demand for houses than the supply of houses, we all know this results in a shortage. I think this issue will come down to who is more willing to pay for the houses and more willing to suffer the opportunity costs. A home is a somewhat inelastic good because we need somewhere to live. Whether this home is more luxurious depends on our willingness to sacrifice other wants. People will probably start to increase their price range to afford a house.
ReplyDeleteI assume with the generation of the baby boomers in America, more houses will start to go up for sale in the coming years. This is due to their aging generation needing assisted living and senior housing communities in order to live longer. This will also lead to these people putting their homes up for sale so that the millennial generation can move in to those homes. In a decade or so this problem of too many home buyers with too little home sellers should even out quite nicely.
ReplyDeleteIt is interesting that there are offers on homes within 24 hours. That is very fast. But, what affects the interest rates, and why are they at an all time low? What would happen if they increased? It is good that demand is higher than supply, but does that mean in the future supply will be higher than demand? Will housing prices fall if that occurs?
ReplyDeleteIt is interesting to hear that the economy is doing so well that millennials now want to purchase homes rather than rent. You mentioned in the last two years that this problem has become more and more prominent and I wish there was a way to tell what caused that. The idea that more and more homes are not becoming available may mean that we need to focus more on the building new homes rather than repurposing old ones due to younger generations becoming the next baby boom. More jobs would become available to build and furnish, inspect and repurpose homes this way.
ReplyDeleteI found it interesting that there are more millenials who are buying homes now today and they have in the past. The housing market is very good right now because you can sell your house fast and with more and more technology to look for houses and make offers even faster now than ever before it is not shooking how easy it is for people to find their house and make an offer within 24 hours. Hopefully the interest rate on the house does not raise to a very large number any time soon.
ReplyDeleteI feel with the rapid growing population it makes sense that there is starting to become an issue with housing that people want. Like you mentioned many people want to purchase middle class homes, but if there is no supply, what is stopping the price from constantly increasing. In addition, the low interest rates are making people who weren’t considering buying a house to now want to with the low interest rates. In order for the price of housing to go down, either there will have to be more supply or somehow demand will have to decrease to bring back down the cost of buying a house.
ReplyDeleteIt's no surprise that the buyers out-number the suppliers. Many people once they buy a home stay there to raise a family, which means more often staying there for 20+ years. But now, as the baby boom era become older and older, they begin to enter into a nursing home or areas and apartments meant for the older generations. But right now, building more and more housing for the millennials and future generations to come will be helpful, since the population continues to increase.
ReplyDeleteIt doesn't surprise me that more and more millennials are purchasing homes more than ever before. I recently moved and ever since I have noticed that the housing market is on great status. However with so many buyers, there aren't going to be enough homes for everyone. Therefore we should be constructing more homes so people can have a house to call their own. I think the interest rates should increase as well so not as many buyers will be purchasing new homes.
ReplyDeleteThe worry of if there is enough supply of houses to sell is a rising concern as more people are looking to be homeowners. However I don't think that the concern of the supply not being available is that valid. If you look around your city you see tons of new houses and neighborhoods increasing. The market has increased and expanded in order to fit the need of new homes needing to be available for purchase. Though this may only be in certain states as far as I know.
ReplyDeleteIn late 2016 early 2017, people where looking at the studies of when people most likely buy houses. And with the data in that year, it came to be a question if houses would not be sold in 2018. And Now I guess its true, because of the high price of houses, who would by a house because at the end of they day if someone did they would lose money. The rate of buying houses have been going down since 2016 making the houses worth a lot more money, and plus with all the new investments, more people are upgrading their homes with the newest and latest tech, making the house price rise even more so, really It does not come to a shock to me that house now in 2018 or high priced and no one is willing to sell or buy.
ReplyDeleteFirst off I wonder what is causing interest rates to be so low that would cause this shortage of housing. And is this specific to Pewaukee? Wisconsin? The U.S? Those are probably some things that you could have clarified on. Also I wonder when this might even out. If you showed us a trend of this happening previously you might be able to tell us your estimate of when the will start to be more people selling their homes again and maybe less buyers.
ReplyDeleteThis is a very relevant topic that is crazy to see first hand. Recently my neighbors put their house on the market and it sold over night so that really shows how much of a demand there is for middle class homes. Hopefully once the baby boom era has moved into nursing homes or has passed away the housing need for the millennial's will be fulfilled.
ReplyDeleteIt is very interesting that more people want to buy houses then people that want to sell houses. There is such a large increase in the amount of people that wish to purchases a house. Along with that there is a large drop in the people willing to sell to these want to be home owners. Why is that? As you said in your blog post many people blame the building costs, cost of living and even the interest rates. However, could it be something else? As more and more people move into the city and land gets taken up in the urban areas people will have to look to more remote places to build houses. This however, will cost more money. So I believe that building prices might conountin to increases because of the location. As people say “Location, Location, Location”.
ReplyDeleteAfter reading this, It make me think about how long it will take for the housing situation to improve. I imagine that the most notable decrease in homeowners is when people from the baby boomer generation will move in to assisted homes or some other form of housing similar to that. Consider their population’s effect on social security, the same can be said about housing. Hopefully enough homes will be available when I’m in my early 30’s
ReplyDeleteIn the past year, I have heard from a variety of people talking about how the housing market is doing very well. Especially in desirable suburbs, it makes since that people aren't willing to sell their houses even though the demand for houses in these areas are increasing. Also, the suburbs are where many of the trendy restaurants and shopping centers are and people want to live in a close proximity for convenience.
ReplyDeleteReading this article actually made me nervous for when I want to buy I home! It makes sense to me that there is such a large demand for houses with not many that are ready to sell however, is this everywhere is the US? Of course the housing market will always be diverse in its prices such as houses in the city being more expensive compared to the suburbs. But my question is, do these prices even affect the strong demand for houses? Overall, this was a very interesting article, nice job!
ReplyDeleteHouses are in high demand with not enough supply from what I can gather from your post. This may be the market for realtors since houses are selling so fast. Since you said low interest rates can indicate a good economy, this might be a sign that our economy is well-off right now. I wonder if this trend will continue or if it will soon turn to be a buyers market. I wonder what the causes are for this shift into high housing prices!
ReplyDeleteThis article was interesting because I think it shows the correlation between population growth and buying a home. It makes sense that there would be less houses available at the moment. This is also an example of supply vs demand. For example, since the supply is low people can sell their houses for more money since the demand is so high at the moment. Similarly, that is an opportunity cost for those buying a house: they will have to spend more to get the same amount of house.
ReplyDeleteI think it's interesting how home prices are now rising. You look around the lake and homes are being sold quickly, and homes are being put up to accompany the demand for housing. That's basically what's happening all around the US. Demand is in such short supply houses have to be built.
ReplyDeleteWhenever I hear about house prices increasing, I think about the housing crisis in 2008. I hope the people who caused that recession, learn from the mistakes that they made and don't do it again. However, it seems as though greed always wins, and we will eventually have another recession, which is inevitable in an economy. However it is a shame to see people get hurt by the greed of others, and the people who caused the pain receive no consequences.
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