Many consumers are wondering what will happen with home
values over the next few years. Some are concerned that the recent run-up in
home prices will lead to a situation similar to the housing crash 15 years ago.
However, experts say the market is totally different today.
For example, Odeta Kushi, Deputy Chief Economist at First American, tweeted
just last week on this issue:
“. . . We do need price appreciation to slow today (it’s
not sustainable over the long run) but high price growth today is supported by
fundamentals- short supply, lower rates & demographic demand. And we are in
a much different & safer space: better credit quality, low DTI
[Debt-To-Income] & tons of equity. Hence, a crash in prices is very
Price appreciation will slow from the double-digit levels
the market has seen over the last two years. However, experts believe home
values will not depreciate (where a home would lose value).
To this point, Pulsenomics just released the latest Home
Price Expectation Survey – a survey of a national panel of over 100 economists,
real estate experts, and investment and market strategists. It forecasts home
prices will continue appreciating over the next five years. Below are the
expected year-over-year rates of home price appreciation based on the average
of all 100+ projections:
Those responding to the survey believe home price
appreciation will still be relatively high this year (though half of what it
was last year), and then return to more normal levels over the next four years.
What Does This Mean for You as a Buyer?
With a limited supply of homes available for sale and both
prices and mortgage rates increasing, it can be a challenging market to
navigate as a buyer. But buying a home sooner rather than later does have its
benefits. If you wait to buy, you’ll pay more in the future. However, if you buy
now, you’ll actually be in the position to make future price increases work for
you. Once you buy, those rising home prices will help you build your home’s
value, and by extension, your own household wealth through home equity.
As an example, let’s assume you purchased a $360,000 home in
January of this year (the median price according to the National Association of
Realtors rounded up to the nearest $10K). If you factor in the forecast for
appreciation from the Home Price Expectation Survey, you could accumulate over
$96,000 in household wealth over the next five years (see graph below):
If you’re trying to decide whether to buy now or wait, the
key is knowing what’s expected to happen with home prices. Experts say prices
will continue to climb in the years ahead, just at a slower pace. So, if you’re
ready to buy, doing so now may be your best bet for your wallet. It’ll also
give you the chance to use the future home price appreciation to build your own
net worth through rising equity. If you want to get started, let’s connect