There’s an article in today’s Washington Post about people afraid to sell their homes. Why are they afraid? Something about being worried that they wouldn’t be able to afford to buy a replacement home.
What’s interesting is that the availability of homes for sale is at “record lows”:
Nationally and locally, statistics show that the inventory of homes for sale is at or near record lows. The National Association of Realtors last week reported that existing home sales in March were the third-highest on record, at a seasonally adjusted rate of 6.89 million sales per year, while the inventory of such homes for resale fell to a near-record low of 2.33 million, or about a four-month supply.
The above quote indicates to me that home prices are actually too low given the demand (which is hard to believe given how much prices have already risen). Prices tend to be sticky and not move up or down as fast as the supply and demand curves dictates they ought to.
I think that the “fear” of selling has a lot to do with the fact that, for many homeowners, the market price of their home has risen beyond their natural ability to pay for such a home if they had to buy it from scratch. For example, if someone bought a house, and then the market price doubled but their salary only increased by 20% during the same time period, their house has risen beyond their natural ability to afford such a house. This is a sign of a bubble when so many people live in homes that they could never afford to buy at current market prices if they had to do it again (without the benefit of the profits they made from buying low).
The existence of so many articles about the price of homes is also an indication of a housing bubble. In 1999 and early 2000, the papers were full of articles about people and their stocks. Those articles are gone, replaced by articles about homes.
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I really think the word “home” is overused. A “home” is one’s place of residence, which might be a “house,” but might be something else like an apartment, a boat, or a dorm room. Unfortunately, the Washington Post seems to be using the word “home” as a synonym for “house.”
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