The Case-Shiller 20-city housing price index for the month of January came out Tuesday morning—Home prices increased 4.6 percent percent over last year.
So, does that mean the housing market is on the rebound?
The answer is complicated, due in part to that basic economic rule: supply and demand. On the supply side, people anticipate interest rates going up, says Craig Lazzara, of the S&P Dow Jones Indices. So they think, “If I can borrow at 3 percent, that’s better than borrowing at 6, so I’m going to borrow today at 3,” he says.
Another thing driving demand: there’s not that much out there for sale, especially in the $200,000 range, which is the median right now.
Danielle Hale of the National Association of Realtors says a lot of people want to buy right now, especially millennials. As for supply, she says for one thing, smaller construction firms are running up against stricter borrowing regulations, “which is keeping that inventory lower than the market is calling for right now.”
So are housing prices going up because of a) an improving economy b) pent up demand or c) limited supply?
The answer: d) all of the above.
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