It’s not surprising news to hear that throughout 2021, home prices continued to appreciate. Today, prices are continuing to be driven by supply and demand, resulting in strong year-over-year home price appreciation. With the available supply sustaining at near historic lows and high levels of demand maintaining, it’s a natural consequence that prices will continue to rise. Nationally, April’s sales figures show a near 20% increase in the median closing price of a home.
Let’s use the three maps below to show how supply and demand continues to affect the residential real estate market:
Above, we see state-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020: As the map shows, certain states (colored in red) have appreciated well above the national average of 12.6%.
This map shows the change in state-by-state inventory levels year-over-year reported by realtor.com: Comparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Idaho, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one that demonstrates the dynamics of a supply and demand related challenge.
Reviewing this data and knowing what we do about the market, it begs one question for everyone: Is relief around the corner?
The same report by realtor.com also shows the monthly change in inventory for each state.
Finally, we see state-by-state changes in inventory levels month-over-month reported by realtor.com: As the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month (May). This may be evidence that homeowners who have been unwilling to let buyers in their homes during the pandemic are now putting their houses on the market. Though a modest increase of 2.5% nationally, if this trend continues we should begin to see some relief regarding price appreciation.
Although the rapid price appreciation seen over the past year has caused some concern and talk of a bubble, the maps above show that the increases were warranted based on great demand and limited supply. Connect with your sellers now to encourage them to capitalize on the market while they can, and with your buyers to ensure them that more listings should come soon.