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Why Are Housing Prices So High?

It's a question that everyone is asking and it seems to be getting more difficult to answer every day. The fact of the matter is, there are many factors at play when determining housing prices in any given city or region. It depends on how much supply there is in relation to demand, what types of homes are being built and where they're located, as well as interest rates for mortgages and other financing options. 

We have created this article so that you can develop a better understanding of the different factors influencing housing prices - including who benefits from them being high - and how you might take advantage of these circumstances if you want to buy your own home!

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What Are The Factors That Drive The Housing Prices High?

  • Economic Change -  As a result of the recession in 2008, home prices dipped to their lowest point in decades. People who already owned homes were able to sell for higher profits than they would have seen just six years before.
  • Taxes - The Government is now doing everything it can to encourage people to buy houses and stay put. In many cases, homeowners are given property tax breaks or other incentives by local authorities if they plan on living there for some time period specified in the contract with that authority.
  • Interest Rates - Interest rates play an important role because when mortgages become more affordable, buyers will likely be more willing to take out loans from banks and use those funds as down payments so that they can purchase a house outright rather than rent one month-to-month. Greater demand for houses on sale equals higher property values.
  • A shortage of homes for sale - A lack of inventory is one reason why home buyers will often have to settle on a higher price than they might be able to afford if there were more properties available. When demand outpaces supply, sellers can charge whatever they want and find someone who's willing to buy it from them.
  • More people living alone - More singles live by themselves which means there's less demand for two bedroom homes or townhouses with enough space to host family gatherings like Thanksgiving dinner or anything else you may want to do at your place other than sleep (or watch Netflix). Fewer families also means fewer children who need their own rooms so every home is competing for a smaller demand.
  • Globalization - Real estate is an international market, which means it's being influenced by events happening around the world. China's economic downturn in 2016 caused many Chinese investors to sell their homes abroad and purchase them back at cheaper rates when they were able to afford them again. This contributed heavily to London property values because of how attractive these properties were for foreign buyers looking for holiday retreats or investment opportunities (and more than one millionaire has been born this way). Meanwhile, other countries like Thailand saw drops in home sales due to worries about geopolitical violence impacting their economies. 
  • Location -  Location is another important factor. Homes in cities with a high population density will be more expensive than those found in rural areas because land and construction materials are often scarce, driving up prices accordingly.
  • Different Types of Housing - The type of home you want may also create a major difference on the price tag attached to it. A single-family suburban house may cost less than an apartment building or condo but just as much as a McMansion (i.e., "a large, showy house that seems out of place"). If you're set on living by yourself or have no kids under 18 years old for whom space matters then this might not matter too much to you; otherwise, if many people like your family need room to grow over time, that McMansion may be a better option.

How Can You Take Advantage Of These Circumstances?

If you are looking to buy your own home in the near future, keep an eye out for any tax breaks and incentives offered by local authorities as well as interest rates - both will influence how much you have to lay down up front for a house or if it's even worth investing at all. You might also want to consider living in areas with low population density so that land is cheaper and construction materials like lumber won't cost nearly as much.

Buy now when prices are lower than they've been in years! If demand outpaces supply then sellers can charge whatever they want but there's no telling how long this market trend might last. If you can afford it, invest in a large home or townhouse with room to grow and don't settle for anything less than what you deserve just because some people might not like how big it is - more space means more potential family get-togethers that would otherwise be spent at a restaurant or spending $40 on takeout food instead of cooking one meal from scratch together every night.

There are a lot of factors that can affect the prices of homes. The most important being what people’s needs and wants are in their lives, which is why it's so crucial to understand your audience when marketing or selling your products. If you're interested in how we've done this with our own company, visit us today!


Are You Looking to Invest in Real Estate in Northern California?

The top real estate agency in Northern California, Sexton Group Real Estate | Property Management in Berkeley, California is a boutique real estate company specializing in residential sales for properties throughout the San Francisco Bay Area. To better serve our clients we have three local offices, one in the heart of picturesque Berkeley, one near downtown Oakland and the third in the heart of historic Lafayette, California. The Sexton Group encompasses the essence of Berkeley’s charm, Oakland’s history and Lafayette’s family-oriented vibe all with a relaxed, down-to-earth nature. We are an amazing group of real estate agents whose wealth of experience spans more than 25 years in the industry.  Looking to buy a home in Contra Costa or Alameda County? Contact us today for your free consultation!