Home Prices are Climbing Faster and Faster

But this is not a bubble

Real Estate News   |  Apr 24, 2015 |  By: Jonathan Smoke

This spring buying season is off to a strong start—in fact, prices are going up faster than they were just a few months ago, according to nearly every recent metric. So does that mean we’re in a bubble?

Nope, that’s just what happens when demand increases faster than supply. After all, existing-home sales were up 9% year over year in March, according to the National Association of Realtors®. Inventory is also increasing, but not as fast as sales, resulting in a tight supply getting even tighter.

An equilibrium level of supply on the market is considered to be six to seven months; supply has been under five months since December. Looking at every quarter since 1988, when supply was under five months, prices rose 8% year over year on average. When supply was in the equilibrium range, prices went up only 4% on average.

The median existing home price in March was $212,100, up 8% over last year, according to the NAR. The median list price in March on realtor.com® was $220,000, which was up 11% over last year.

During the peak years of the housing bubble, from 2003 to 2005, the data on supply versus price appreciation looked very similar to what we are seeing now. But there are key differences, which is why I’m confident that on the national level, this is no bubble.

Read the rest of this article at Realtor.com to see why, this time, the price increases should stick .


As chief economist of realtor.com®, Jonathan Smoke leads its efforts to develop and translate real estate data and trends into accurate and relevant consumer and industry insights on housing.