Why are home prices so high right now in our market?
Interest rates are getting higher, and home values continue to climb. Why are prices so high? Here are a few key factors you need to keep in mind.
Supply and Demand. As supply diminishes and demand stays the same or rises, prices rise accordingly. In one of the recent videos, I discussed how builders went out of business during the economic crash. I have also explained in another video why demand increased during the pandemic. However, aside from these, there is also another interesting factor that affected home prices.
Corporate Investments. During the collapse in 2008 and 2009, banks were packaging houses and selling them to hedge fund buyers and tons of other investors. Before 2016, almost no companies owned single-family homes because these were still not a desirable asset class for them. However, by 2016, homes became an asset class in which 7% of single-family homes were now being sold to corporations, hedge funds, etc. If 7% of yearly home sales continue to be owned by corporations and not brought back to the market, supply continues to decrease while demand stays the same, hence price increases.
To know more about high home prices and if you have any questions, feel free to call or email me. I would love to hear from you.
