Home Prices: It’s All About Supply and Demand


As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of what’s to come.


Making our way through the month of June and entering the second half of the year, we face an undersupply of homes on the market. Keep in mind, this undersupply is going to vary by location and by price point.



According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.


Robert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:


“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”


Given the undersupply of homes on the market today, there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process.


According to a recent MarketWatch article:


“𝘈𝘴 𝘣𝘶𝘺𝘦𝘳𝘴 𝘳𝘦𝘵𝘶𝘳𝘯 𝘵𝘰 𝘵𝘩𝘦 𝘮𝘢𝘳𝘬𝘦𝘵 𝘢𝘴 𝘵𝘩𝘦 𝘤𝘰𝘶𝘯𝘵𝘳𝘺 𝘳𝘦𝘣𝘰𝘶𝘯𝘥𝘴 𝘧𝘳𝘰𝘮 𝘵𝘩𝘦 𝘱𝘢𝘯𝘥𝘦𝘮𝘪𝘤, 𝘢 𝘭𝘪𝘮𝘪𝘵𝘦𝘥 𝘪𝘯𝘷𝘦𝘯𝘵𝘰𝘳𝘺 𝘰𝘧 𝘩𝘰𝘮𝘦𝘴 𝘧𝘰𝘳 𝘴𝘢𝘭𝘦 𝘤𝘰𝘶𝘭𝘥 𝘧𝘶𝘦𝘭 𝘣𝘪𝘥𝘥𝘪𝘯𝘨 𝘸𝘢𝘳𝘴 𝘢𝘯𝘥 𝘱𝘶𝘴𝘩 𝘱𝘳𝘪𝘤𝘦𝘴 𝘩𝘪𝘨𝘩𝘦𝘳.”


In addition, experts forecasting home prices have updated their projections given the impact of the pandemic. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.



𝔹𝕠𝕥𝕥𝕠𝕞 𝕃𝕚𝕟𝕖

Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale.

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