Tuesday, October 31, 2023

Why are US house prices rising again?

From CalculatedRiskBlog.com: Two forces are pushing house prices in opposite directions: a decrease in supply raises price and reduces quantity, whereas a decrease in demand reduces both price and quantity.  

In the graph above, we see the supply measured as months of inventory (#months it would take to sell off the #listings), plotted against the annual change in prices.  In August 2023, the black triangle indicates about 3 months of inventory (measured on an inverted vertical axis), and an annual price change of about 5%.  The graph above indicates a negative relationship between supply and price, as the months of inventory goes down, the price change goes up.  

Below we see the reason why demand is declining:  the high price of a mortgage loan (7.62%) is deterring homebuyers from borrowing money needed to buy a house.  


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