In a sellers’ market, increased demand for homes drives up property values. Several factors contribute to this demand:
Economic Factors – The real estate market is deeply influenced by external conditions, such as a booming local labor market or an influx of new residents, which can push home prices higher before additional inventory is available.
Falling Interest Rates – Lower interest rates make homes more affordable, attracting new buyers, especially first-time homebuyers, who can now afford larger properties due to reduced costs.
Short-Term Interest Rate Spikes – A sudden, sharp increase in interest rates can prompt “on the fence” buyers to act quickly, fearing that rates will continue to rise. As interest rates climb, affordability decreases, prompting some buyers to enter the market sooner.
Limited Inventory – A shortage of new construction leads to fewer homes for sale, which can drive up prices for existing homes as demand outpaces supply.