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Economic Slowdown? No, Supply and Demand Set Home Prices

Spring and summer are traditionally hot seasons for real estate. However, the ongoing health crisis and talks of economic slowdown have many buyers and sellers worrying that real estate will suffer. Since supply and demand set home prices, we may be able to get an idea of what’s on the horizon.

Supply and Demand Set Home Prices for the Future

buyers talking to an agent

The price of real estate isn’t solely dependent on the economy. In fact, home prices are predominantly set by supply and demand, meaning that if buyer demand exceeds the supply of homes for sale, prices will increase. And should demand drop or supply soar, prices will take a dive.

So, how does 2020 supply and demand look?

Supply of homes is low

a home for sale in the Triangle

Housing inventory has been low for almost 10 years now. Historically, six months of inventory is considered to be a “balanced” market. According to the National Association of Realtors (NAR), we currently have a 4.1-month inventory, which indicates a low supply of homes.

It’s a seller’s market

a relieved home seller

The NAR considers a housing inventory greater than six months to be a buyers market. In a buyer’s market, prices typically decrease. Anything under a six month supply indicates a seller’s market, which often sees an increase in prices. Currently, we are experiencing a seller’s market—which indicates price appreciation.

Economic recovery could rely on housing

building a home in the triangle

Going into the health crisis, our housing market was underbuilt, meaning there was a greater demand than a supply. This is actually a good thing—demand has stayed steady, encouraging sellers to list and creating jobs for builders, contractors, suppliers, agents, and more.

Prices are holding steady

steady home prices

This low supply of homes has held prices steady, despite the nation’s economic instability. Housing works the same as, say, toilet paper; when there isn’t enough but demand is high, prices will increase. Undersupply can also lead to bidding wars, driving prices up even further.

Buyers are returning to the market

searching for a home for sale

As businesses begin to reopen and people to return to work, buyers too are returning to their home buying goals. More and more buyers are entering the real estate market, steadily driving up demand.

This increased demand, coupled with low inventory, is expected to push prices upwards, too. In fact, several real estate economists and institutions, including the Mortgage Bankers Association, Fannie Mae, the NAR, and Freddie Mac, predict price increases through 2022.

The Bottom Line: Home Prices Should Increase

searching for a home

While economic volatility and business closures might indicate that a drop in home prices is on the way, experts disagree. The foundational economics of supply and demand indicate that prices could actually increase (as much as 4.3%, says Mortgage Bankers Association) through 2020.

Ready to Make a Move in the Triangle?

If you’re thinking about buying or selling a home in the Triangle, Linda Craft & Team is here to help! The market is strong, prices are on the rise, interest rates are low, and in short, there’s never been a better time to make a move. Contact us today at 919-235-0007 to learn more about how we can put our 350+ years of combined real estate experience to work for you.

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