According to research by two economists with the Federal Reserve Bank of San Francisco, higher prices will encourage owners to sell their homes and help solve the current shortage of homes for sale.
With more homes on the market it is an easy step to see how this will increase the number of sales.Â
Many homeowners are waiting for prices to rise before they will consider selling. This is particularly true here in the Sacramento region where we had so many homes worth less than what the homeowner owed. At MagnumOne Realty, we have a number of prospective clients, who we know want to sell but are waiting and hoping prices continue to move up to a point where they have sufficient equity to help them make their next purchase. The two economists, William Hedberg and John Krainer confirm this in their article, “Why Are Housing Inventories Low?” when they point out counties with a high share of underwater mortgages tend to have the smallest for-sale inventories.
They also indicate that there is a distinct pattern in housing inventories. The number of homes on the market rises in good economic times and falls in bad.. Some of it can be explained by credit, they say. Lenders tend to ease credit restrictions during good economic times, which help more buyers enter the market. This sounds good but we have yet to see lenders reduce the current very tight credit standards even though we are seeing the overall economy improve.
In conclusion the economists say the housing markets that have seen the strongest house price appreciation and job growth are the ones that are seeing for-sale inventories increase the most.
