What Does the Future Hold for Home Prices?
19501
post-template-default,single,single-post,postid-19501,single-format-standard,bridge-core-1.0.2,qode-quick-links-1.0,qode-page-transition-enabled,ajax_fade,page_not_loaded,,qode-title-hidden,qode-theme-ver-25.5,qode-theme-bridge,wpb-js-composer js-comp-ver-6.6.0,vc_responsive

What Does the Future Hold for Home Prices?

What Does the Future Hold for Home Prices?

Home prices are at the top of everyone’s minds. Can they maintain their current pace of appreciation? Will rising mortgage rates negatively impact home values? Will the next economic slowdown cause prices to crash?

Let’s try to answer these questions based on what has happened in the past as well as what we know about the current real estate market.

The Impact of Rising Interest Rates

We explained earlier this year that rising mortgage rates have not negatively impacted home prices in the past and probably wouldn’t this time either. Freddie Mac’s comments were very direct:

“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

They were correct. So far this year, home values have continued to appreciate above normal historic percentages and it appears the gradual increase in rates has had little impact on prices.

The Impact of an Economic Slowdown

Many people fear that when the economy turns, we may see the same depreciation in home values as we did a decade ago.

However, we recently reported that the same group of economists, real estate experts, and investment & market strategists who predicted the next recession will occur in the next 18-24 months have also projected that house prices will continue to appreciate for the next five years, albeit at smaller percentages.

It Comes Down to Supply and Demand

As always, home prices will be determined by the demand to purchase compared to the available inventory of homes for sale. For the last six years, demand has far exceeded the available supply which has resulted in the average annual appreciation to top 6% since 2012. That is far greater than the historic norm of 3.6% annual appreciation that we saw prior to the housing boom.

There are currently small signs that housing inventory is slowly beginning to increase. Months supply of houses for sale matched last year’s numbers for the last two months after 37 consecutive months of decreasing inventory. New construction data has also shown positive signs that inventory will be increasing.

As inventory begins to meet demand, we will see appreciation return to more normal levels. We are already seeing projections coming in lower than the 6.2% annual average we have seen more recently.

CoreLogic is predicting that home values will appreciate by 5.1% over the next twelve months and the Home Price Expectation Survey calls for values to increase by 4.2% in 2019.

Bottom Line

Mark Fleming, Chief Economist at First American, explained it best:

“We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”

Source: Simplifying the Market

 

ABOUT ERIC MATZ:
As a professional Realtor, Eric’s commitment is to always represent the client’s best interest.  He uses his extensive experience to secure top dollar for sellers and personally guide them through the transaction. Eric works with a wonderful team who devote themselves to serving the needs of their clients before, during and after the move.

Eric’s business is built on repeat clients and their referrals. He wants to earn their respect, so he makes a constant effort to improve the level of service he provides. Eric is a relationship builder and prides himself on being the trusted advisor for so many homeowners.

Whether you are buying or selling your next (or first) home, Eric is ready to help. Eric knows Poway well, as it’s the place where he grew up and raised his own family. Having been a lifelong San Diego resident, he is knowledgeable about most areas of the county and can assist with a home sale from the coast to the inland areas. When you’re ready to buy or sell, give Eric a call, he looks forward to earning your business and be your Realtor for life!

You can contact Eric at (619)733-8087 | [email protected]