Posted on 09/11/2013 7:49:45 AM PDT by SeekAndFind
Price appreciation is largely driven by the degree to which demand exceeds supply. While the best short-term measure of the housing demand/supply balance is months of supply of homes on the market, the best long-term measure is the ratio of household formations to new home construction. Since household formation data is highly unreliable, we use job growth as the best proxy because there are typically 1.2 jobs per household.
Affordability, confidence, and demographic factors determine whether that household rents or buys. We have a great demand model that estimates that demand by price and rent range.
Consider the following:
* Demand exceeds supply in 90% of major markets. The employment growth-to-permit ratio (E/P ratio) remains above the standard equilibrium level of 1.2 in 18 of the top 20 markets. Nationally, the E/P ratio of 2.5 is well above equilibrium levels and up from a ratio of 2.3 a year ago.
* E/P ratios are most favorable in many slower recovering markets. Demand exceeds supply the most in many markets that are still in the very early stages of recovery, like Chicago and Boston. In Chicago, job growth exceeds permit growth by a factor of seven. The primary cause of limited price growth in many Midwest and East Coast markets is distress, which is steadily clearing. Once the excesses clear out, these markets are poised to appreciate quite well.
* Texas' job growth continues to outpace supply. Robust economic growth will continue to boost prices in Texas, despite minimal entitlement barriers and permit levels that are near historic norms. Despite rapidly rising construction, Houston and Dallas are still adding jobs twice as fast as new home permits are being pulled.
(Excerpt) Read more at businessinsider.com ...
read the comment on the article at the site. Very contra.
BS Insider
what? where I live it is taking 4 years to sell a house....
demand exceeds supply?
Very doubtful
My sister sold her home for a lot less than she bought it for, in one of the top real estate markets in the country in Texas where the economy is not as bad as most of the country.
for later
Could be true for wrong reason.
Banks still hold inventory of F/C homes, not releasing inventory all at once.
I used to think the reason home builders wanted more illegal immigration was to get cheap labor.
Now I think they want cheap labor and more people to buy their homes.
The boomers are retiring and downsizing, and in 20 years dying.
Now now, not supposed to dash things with facts.
Demand never exceeds supply when prices are free to move.
“Location, Location, Location.”
This the biggest bunch of carpola I have ever read. The Atlanta housing market is non existent. After 27 years in the mortgage industry I can promise you things are not better. Except in DC, N Dakota and a couple of other places. Nothing is selling and no building is going on. Wait til interest rates go up another point. And over 90 million people still out of work and likely to continue for 3.5 more years.
Flippers are buying up the fixer uppers, putting in fresh paint and carpet. Lots of existing homes are functioning as rental properties.
This is not comparable to an 80’s style mega build trend.
ChiComs are buying up tons of properties.
yeah, maybe Kansas City isn’t Florida
oh wait, Florida has tons of empty houses you can get for a song
It's more a sign of how far down the market went, with the eventuality of smart people moving in and buying up all the good deals that were half price. Eventually, no more deals, and now it's much harder to even find one at market price.
This may change as interest rates move up.
New homes are going up like crazy in our area south of Houston. One subdivision new since January 2013 has 1500 homes, all occupied. Also three new schools under construction with ballot issues this fall to build two more. Resale houses in our neighborhood sell within 2-3 months now versus 6-8 months last year, except for one which has been on the market for 5 months now. But IMO it is priced too high - $50,000 more than they paid for it when it was built ten years ago and $20,000 more than the sales price of any of the similar homes in the neighborhood.
I don’t wish these sellers ill but if it sells for anywhere near the listed price, taxes on everyone’s home in the neighborhood will increase because of supposed increase in value. And our property and wind insurance costs will also increase.
With market pricing, demand = supply everywhere.
Demand exceeds the supply of underpriced homes, and supply exceeds demand for overpriced homes.
save for later
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