Wednesday, November 20, 2013

Nothing Available. Home Sales Drop 7%, Price Up 25%

 

Classroom Perfect Example of Supply Demand Curve is California Housing Market


According to CNBC.com

"In the West region there is a significant shortage of inventory, so you have buyers who are looking for the right home unable to find it and unwilling to commit," said Lawrence Yun, chief economist for the National Association of Realtors. "But because of the inventory shortage, one is still seeing strong price increases in the West."

Demand is moderate or the situation would be chaotic.  Kids can't afford to move out of their parent's home, those who'd like to be living alone have room mates.  There is little to no immigration, especially the extra legal type.  If the economy were to produce 250,000 jobs a month for six months or so, especially if those were full-time, there would be pent up demand that would start to turn loose. 

Also holding down sales is the tight mortgage market and the slight increases in interest rates.  While these increases don't really add much to the monthly payment, there is a psychological impact.  Generally, if demand is strong enough, that psychology can change to worry about grabbing current interest rates before they go higher. 

Bottom line on bubble speculation.  Probably not.  No place for the population to move.  No lower cost alternatives.  No more room at the inn.  Rents and prices are likely headed higher yet. 

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