Chapter 4
Why Home Prices Rise and Fall
In This Chapter
Determining present and future home values
Figuring where home prices may be headed in your community
Using strategies to get more for your money in any type of market
If you’re contemplating the purchase of a home, you may be concerned about the future direction of home prices. After all, who wants to buy a home and then see prices drop? Conversely, who in their right mind wouldn’t love to jump into the real estate market before prices head higher? To understand what drives home prices, you must examine what drives the supply of, and demand for, homes.
As we discuss what causes home prices to rise and fall in this chapter, please keep the following in mind: When it comes to buying and owning a home, don’t get too hung up on the current state of your local market. If you take the perspective that after you buy a home, you’re likely to own one for many decades, worrying about timing your purchase is generally not worth the trouble. Timing — that is, buying when prices are at rock bottom and getting out when you think that home values are cresting — is extraordinarily difficult to do. We know people who started waiting for lower home prices a generation ago — and they’re still waiting!
Predicting what’s going to happen with real estate prices in a particular neighborhood, town, region, or state over the next one, two, three, ...
