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Find Out How Supply And Demand Is Driving Up Home Prices
Dated: June 9 2021
Find Out How Supply and Demand is Driving Up Home Prices in Florida
Home price appreciation continues to accelerate, especially in Florida. Today, home prices are driven by the simple concept of supply and demand (aka low housing inventory combined with LOTS of Buyer demand). Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation in our state and many others is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.
Let’s use three maps to show how this theory continues to affect the residential real estate market.
Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:
As the map shows, Florida lands right at the national average, with +12.6% appreciation. Notice that a few other states (colored in red) have appreciated even more, above the national average of 12.6%.
Map #2 – The change in state-by-state inventory levels year-over-year:
Comparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Florida, Georgia, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one of causation when it comes to the Florida housing market.
The reason prices continue to accelerate is that housing inventory is still at all-time lows while demand remains high.
Is there relief around the corner?
The report by realtor.com also shows the monthly change in inventory for each state.
Map #3 – State-by-state changes in inventory levels month-over-month:
As the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month. This may be evidence that homeowners who have been afraid to let buyers in their homes during the pandemic are now putting their houses on the market. However, Florida and a few other states are still in negative housing inventory territory, meaning buyer demand continues to remain extremely high. It doesn't mean Florida won't catch up eventually, but it does mean we still have an extremely competitive housing market in our state.
Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels (which is typically +4% per year). This doesn't mean prices will go down, it simply predicts that if more inventory hits the market, steadier growth may be on the horizon vs the extreme price growth we've been experiencing for the past 12 months or so now.
To find out more about what your home is worth or what the market looks like for buyers in the Tampa Bay, FL area, call us at (727) 400-3315 or message us to get more information. We'd love to hear from you!
Andrea is the Managing Partner of The Sandy Hartmann Group and runs the team alongside Sandy Hartmann. She would love to talk to you about real estate! Andrea was born and raised in the Tampa Bay a....
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Find Out How Supply and Demand is Driving Up Home Prices in FloridaHome price appreciation continues to accelerate, especially in Florida. Today, home prices are driven by the simple concept of