What Supply and Demand Dynamics Mean for Home Values

John Smith
January 1, 2023
5 min read

The latest appreciation and inventory data show why housing remains a great avenue for wealth creation. Read on for more details in these headlines:

  • Home Prices Expected to “Extend to New Highs”
  • The Real Story on Existing Home Inventory
  • Is a Rise in Initial Unemployment Claims Ahead?
Home Prices Expected to “Extend to New Highs”

Black Knight released their Home Price Index for November and December, and home values rose 0.1% in each of those months. Prices were also 5.6% higher than in December 2022.

CoreLogic also released their latest Home Price Index, which showed that national home values fell 0.1% from November to December. While this monthly figure was slightly different than Black Knight’s, CoreLogic’s 2023 level of appreciation was nearly equivalent, with home values up 5.5% last year.  

CoreLogic forecasts that home prices will fall 0.2% in January and rise 2.8% in the year going forward, though it’s worth noting their forecasts tend to be on the conservative side historically. For example, CoreLogic originally forecasted that we would see 3% appreciation in 2023 but we saw 5.5%. Plus going back to 2021, they had forecasted a 6.6% decline in home values, and we saw a nearly 19% gain instead.

What’s the bottom line? The rise in home prices reported by CoreLogic and Black Knight has been echoed by other major indices like Case-Shiller and the Federal Housing Finance Agency, showing that now remains a great opportunity for building wealth through real estate. CoreLogic’s Chief Economist, Dr. Selma Hepp, also noted that “home prices will continue to extend to new highs entering the typically busy spring homebuying season.”

The Real Story on Existing Home Inventory

The National Association of REALTORS® (NAR) recently reported that there were just 1 million homes available for sale at the end of December, which was down 11.5% from November’s 1.13 million available homes.

But these numbers don’t tell the whole story! Many homes counted in existing inventory are under contract and not truly available for purchase. In fact, there were only 666,000 “active listings” in January, well below what’s counted in NAR’s reporting and less than half of what we would expect to see in a normal market.

What’s the bottom line? Tight supply is going to remain a reality for some time. Many homeowners with low-rate mortgages are holding on to their property instead of listing it for sale. Plus, demand is only expected to rise, especially if rates move lower this year and more buyers decide to resume their home search. Fannie Mae’s latest Home Purchase Sentiment Index showed that an all-time survey high 36% of respondents said they expect mortgage rates to decline in the next 12 months.

This ongoing disparity between supply and demand is a key reason why home values continue to rise and why now provides great opportunities to take advantage of appreciation gains.

Is a Rise in Initial Unemployment Claims Ahead?

The number of people filing new unemployment claims was lower than expected in the latest week, as Initial Jobless Claims fell by 9,000 to 218,000. Continuing Claims also declined by 23,000, with 1.871 million people still receiving benefits after filing their initial claim.

What’s the bottom line? While Initial Jobless Claims are still relatively low, the four-week average is near the highest level since December. There have also been some high-profile layoff announcements recently, and these numbers could be reflected in future initial unemployment filings.

In addition, Continuing Jobless Claims are hovering around the highest levels since 2021, suggesting that people are having a harder time finding new employment once they’re let go.  

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