A blog from Pacific Mortgage Co

What causes home prices to fluctuate

What causes home prices to fluctuate

The value of a home can fluctuate from year to year – and even from month to month. The median sales prices of homes in the United States are between $188,900 and $279,900, but there can be significant differences depending on the time of year, neighborhood, or the state of the economy. Whether you’re a buyer looking to get the most bang for your buck or a seller wanting to get the most money for your current home, understanding changing home prices can help you decide when to make a move in the real estate market. While there are a number of reasons home prices can change, the following are four common reasons home prices fluctuate.

1. The economy

Whether it is strong or weak, the economy has a significant impact on home prices. When the economy is strong, families feel more financially secure, are more willing to take out a larger mortgage, and home prices tend to increase. In an unstable economy, people can lose their jobs or fear getting laid off; this leads to fewer home purchases and, by extension, lower home prices.

2. Supply and demand

Real estate is subject to the economic laws of supply and demand; when there are more buyers than sellers, home prices go up. When there are more sellers than buyers, home prices go down. Spring tends to be the most popular season to buy a home. Because of this, sellers can expect higher home prices, ensuing bidding wars, and even paying over asking price. In colder months, demand goes down; with fewer people shopping for homes, sellers may list for a lower price tag.

3. Location, location, location

Real estate is all about location, location, location; what neighborhood, school district, city, or even state a home is located in can have a major impact on its price. In San Francisco, for example, the median sale price was $1.6 million in 2018; in Kansas City, the average home sells for $236,000. If you aren’t willing to move across the country to a less expensive area, homes in up and coming or traditionally less popular neighborhoods tend to have lower pricing.

4. Interest rates

Changing interest rates can impact housing prices. When interest rates are low, home prices tend to be higher; this is because lower rates encourage more families to buy homes, increasing competition and therefore prices as well. Interest rates tend to go up when the economy is down as banks are less willing to take risks on mortgages. Because higher interest rates make higher monthly payments, potential buyers can afford less; this leads to home prices decreasing.

by Author, August. 27, 2019

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