Journals Rare Rationale For A Home Price Phenomenon

Journals Rare Rationale For A Home Price Phenomenon

Last week’s Wall Street Journal’s “Heard on the Street” headline “Why Home Prices Have Nowhere to Go But Up” may have guaranteed attention—but at the cost of advancing a pretty iffy notion. Then again, if you have been window shopping (or is it “screen shopping”?) through the St. Cloud listings anytime recently, the idea could well have seemed less preposterous than usual.

Of course, markets go up, down, and sideways. In residential real estate, any “down” movement has a centuries-long track record of proving to be temporary. But “nowhere to go but up”? Putting aside the common wisdom that nothing is guaranteed in a free market, author Justin Lahart does lay out a reasonable argument for why today’s pattern of home price rises is peculiarly supportive of his theory. The situation sets up like this:

  • Consumer optimism is measurably peaking. After such a lengthy stretch of flat expectations, a wave of would-be house buyers is out there (“there are a lot of people who would like to buy a house…”).

  • Employment is robust—and so is the economy (“…and plenty of them can afford to”).  

  • Since many builders dropped out during the housing bust, today’s builders face less competition. With building materials and labor costs on the rise, they have less reason to increase their pace of construction.

  • Inventory of available housing remains below working-age population growth.

The normal course of events has it that when home sales volume falls, prices should be forced downward. That makes sense—unless the slowdown is due to a lack of homes to sell. Taken together, all the factors add up to an explanation for the rare combination of slower sales volume yielding rising prices—which is what has been happening in wide swaths of the U.S.

St. Cloud home prices may not always reflect the Journal’s national trends, but the situation actually does supply some rationality for the proposition that “home prices have nowhere to go” except up—for the moment, at least. In any event, it’s hard to disagree that today the price outlook looks propitious—as well as a good time to give me a call for a chat about how your plans can gel with today’s market!

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Phone: 320-980-3100
Dated: June 25th 2018
Views: 467
About Noel: Passion for investing in real estate brought me to create Premier Real Estate Services in 2002. Ten ...

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