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Valuation Blog 12.22.2011
Supply, Demand and Home Prices, HVF.com Monthly Market Update – December 2011

It has become apparent to many observers that home prices in much of the country have bottomed out.  In fact, most markets hit their low in early 2009.  At the same time there is almost universal consensus that it will be many years before there is any significant increase in prices.  While we agree that home prices will only exhibit moderate increases over the next several years, we believe that potential is building for more significant increases after that.

The housing markets are driven by basic supply and demand factors, just like any other market.  In the case of housing, the most basic measures are the number of new housing units (supply) and the number of new households (demand).   While the recent recession has slowed the rate of new household formation, its negative impact on new home construction has been more severe, causing housing starts to be at the lowest levels in fifty years.  This is setting up a classic imbalance between supply and demand – potentially resulting in stronger home price pressures than currently being expected when the housing market recovers.

To see the interaction between home prices, supply and demand we created an indicator by overlaying the annual number of new single family/condominium housing units on the number of new households.

To see the graphs and read the entire update, please visit Home Value Forecast.

About Home Value Forecast

Home Value Forecast was created from a strategic partnership between Pro Teck Valuation Services and Collateral Analytics.  HVF provides insight into the current and future state of the U.S. housing market.

Each month Home Value Forecast delivers a monthly briefing along with “Lessons from the Data,” an in-depth article based on trends unearthed in the data.

HVF is built using numerous data sources including public records, local market MLS and general economic data.  The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a subscription to the service.  A trial subscription is available upon request.

To see how Pro Teck and Collateral Analytics can help your company with its valuation needs, please call 800.886.4949 or email sales@protk.com.