If home prices edge higher, the housing market will see an increase in home sales, according to two senior economists with the Federal Reserve Bank of San Francisco. The economists note that it's not that higher prices entice buyers as much as the higher prices entice owners to sell their homes, thus alleviating current inventory shortages.
Existing home prices have edged up 11.7% in the past year according to the National Association of Realtors, but many sellers are waitng out the market until home prices rise more. Despite rising appreciation, some sellers are still underwater on thier mortgages, or do not have enough equity to motivate them to sell.
The economists say that a distinct pattern exists in housing inventories, with the number of homes for sale rising in good economic times and falling in bad times. Some of it can be explained by credit, they say. Lenders tend to ease credit restrictions during good economic times, which helps more buyers enter the market.
Tom: Like you, when I read the title of this article it seemed quite contradictory and confusing, but as I read the article it made more sense. With the easing of credit restrictions, combined an improving economy and the "Boomerang Buyer" affect, we should see a solid real estate market for at least a few more years. The Boomerang Buyers are those who lost their jobs and/or homes during the economic/real estate slump, but are now back on their feet. Enough time has gone by to restore their credit rating and be approved for loans again.