What's Driving Those Home Prices? A Few Theories

WASHINGTON, DC-It is a good time to be a home seller again – finally. Or at least, it is not the depressing state of affairs that it was during the depth of the recession. The Standard & Poor’s/Case-Shiller home-price index showed that home prices increased 6.8% in December—the largest year over year increase in six years. Separately, Commerce Department statistics show that new-home sales rose 28.9% in January year over year.

In the big picture, this is a function of supply-demand fundamentals, says Christopher Tower, assurance partner in the Real Estate practice of BDO USA. Given the still shaky nature of the recovery, though, it is worth taking a closer look at what is driving these supply-demand factors.