The price of housing, like almost everything else, is determined by supply and demand. The more buyers and the fewer sellers in a local market, the faster housing prices rise. Conversely, more sellers and fewer buyers, the slower housing prices rise. Prior to the Great Recession, however, people actually believed that housing prices never went down. Sadly, that was not to be the case.
The American Association of Realtors’ general rule is that if there is a six months’ supply of houses, the market is in equilibrium; that is, housing prices neither move up or down. However, if there is less than a six months’ supply, house prices tend to rise, and vice versa.
The first thing your real estate agent will do before they meet with you is to look up comparables. Comparables are houses that were sold or are for sale in your neighborhood or in the neighborhood you are considering. In order to be comparable, it should have approximately the same square feet as your house or the house you can afford, have the same number of bedrooms and bathrooms, and share other traits in common.
Zillow and Redfin are two good sources for house prices. They can give you fairly accurate estimates of average home prices in the area you are considering. When you look at prices, only look at sales prices, not the listing price. Only a sold house will give you the correct price that a willing seller and a willing buyer will agree upon.