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Is The Current Increase in Home Prices Real or Temporary?

05 Mar

There are plenty of opinions speculating about recent changes in the housing market as well as what the future may hold. Radar Logic provides a perspective I tend to agree with most. Radar Logic is a technology-driven data and analytics business that produces a daily “spot” price for residential real estate in major U.S. metropolitan areas. According to Radar Logic the recent gains in the housing market are “unsustainable”.

Radar Logic attributes the current trend of increases in the price of homes to several factors it considers to be temporary in nature, and therefore the trend itself may be temporary. Such factors as abnormally low interest rates and increased investor demand. This is likely to change as the price of homes continues to increase. The firm anticipates that as prices increase investors will lose their enthusiasm for the market as they are not able to find the deals they once could. At the same time both homeowners and financial institutions that have been waiting to sell may be encouraged to put their properties on the market as they see prices on the rise, increasing the supply of housing inventory. Builders are also once again adding to the mix with a 23.6 percent increase in new housing starts from a year ago January. As the scale of supply and demand begins to tip more toward supply side we may see the price of homes on the decline once again. Of the two primary ingredients for a true recovery in home prices, according to Radar Logic, “Neither are much evident at the moment”. A rise in employment and a return of consumer confidence.

It will be interesting to see how this market develops in coming months and years. None of us have that coveted crystal ball to tell what exactly the future may hold. Personally, I think the logic of Radar Logic contains a lot of common sense as well as the analytics to back it up.

 

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Posted by on March 5, 2013 in Real Estate Market

 

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