Home-price growth fastest in more than seven years
According to the article from the Wall Street Journal http://www.marketwatch.com/story/home-price-growth-fastest-in-more-than-seven-years-2013-10-01, home prices across the U.S. have accelerated to the fastest pace since 2006. Compared to last year, home prices have increased by 12.4%. The continued increase in home prices will eventually lead to a decrease in the quantity demand of homes. Also, the article states that the rising mortgage rates are starting to slow the housing price increase. A reason for the increasing mortgage rates is due to speculation stated in May about the Federal Reserve scaling back on its asset-purchase program. As a result, a 30-year fixed-rate mortgage has increased by one percentage point. Increasing mortgage rates will lead to a decrease in quantity demand for homes or shift the quantity demand upward on the demand curve. My wife and I are in the process of purchasing a home. We currently live in Lehi and hoped to find our new home in Lehi during the house search. However, the prices of homes in Lehi increased rapidly and we were priced out of the housing market there. Due to the rapid increase in homes, the quantity demand for homes in Lehi has decreased (quantity demand shifted upward on the demand curve) for people with a certain income and below. However, if mortgage rates decrease, the quantity demand can shift down and allow those individuals priced out of the market previously to purchase homes in Lehi.