Why are Real Estate prices going up?

understanding the Higher Real Estate Prices


The real estate market is in a unique situation with high demand and low supply leading to major price increases. While it’s a great time to sell a home, purchasing a home is currently a challenge for most buyers across the country.



Low Housing Inventory

Before COVID-19 hit last year, housing inventory was already low. Then, the economic impact of the pandemic drove supply even lower. Fewer homeowners listed their existing homes for sale, especially older homeowners that may typically have sold their homes and downsized. Instead, they stayed in place.


In addition, new home construction lagged. A low supply of lumber rates drove up housing prices and slowed new construction even more. Also, record-low interest rates made homebuying more desirable for first-time buyers. The result is a housing market where demand far exceeds supply.


How Lumber Impacts Housing Prices

At the start of the pandemic, lumber production halted because of stay-at-home orders. Even after restrictions lifted, the lumber companies had less production due to social distancing and quarantining protocols. Less lumber entered the market.


At the same time, the demand for new home construction increased. Homebuyers need more new construction options since fewer existing homes are available to buy. Yet, with less lumber, it’s harder for home builders to complete projects.


Plus, the economic principles of supply and demand show that when supply is low and demand is high, prices increase. The price of lumber has increased by around 30% in one year. It now costs more to build a home than a year ago.


The Current Issue for Buyers

It is a seller’s market. Houses are selling fast with multiple offers above the asking price. Many homebuyers feel desperate to find a home. However, it’s important to stay patient and keep a level head when buying a house. Emotion comes into play, especially in a bidding war.


Thankfully, economists don’t see the current rise in home prices as a housing bubble. We agree. While prices have increased, real estate remains a good investment. Housing prices are not predicted to drop, but we do think the huge market frenzy will slow.


Invest in Real Estate Experience

This is not the time to navigate the real estate market on your own. While we’re not concerned with a real estate bubble popping, we don’t want you to pay more for a home out of an emotional reaction. Also, because prices will continue to increase, you don’t need to wait to buy.


Partner with an experienced and trustworthy real estate team, like The Rivera Group. For sellers, we’re here to help you price your home accurately to maximize your return. For buyers, we’re here to guide you through negotiations and offer input so you don’t pay too much for a home.


Let us help you! We know Delaware real estate and have a passion for helping our clients find the best solution for your real estate transactions. Contact us today, your Kent County Realtors to schedule a free consultation.