Are you wondering what will happen with home values over the next few years? Some are concerned that the recent large increases in home prices will lead to a situation similar to the housing crash 15 years ago.
Although nobody has a crystal ball, 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 unlikely.”
Locally, price appreciation may 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).
Echoing this, Pulsenomics recent release of 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:
- 2022: 9%
- 2023: 4.74%
- 2024: 3.67%
- 2025: 3.41%
- 2026: 3.57%
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 inventory of homes available for sale and both prices and mortgage rates increasing, it can be a challenging and frustrating market to navigate. Buying a home sooner rather than later does have its benefits. If you wait to buy, you’ll pay more in the future as both homes will increase in value/list price and interest rates will continue to rise. 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.
For example, let’s assume you purchased a $360,000 home in January of this year (the national median price according to the National Association of Realtors rounded up to the nearest $10K). In our Puget Sound area, you can basically double this number. If you factor in the forecast for appreciation from the Home Price Expectation Survey, you could accumulate over $96,000 (again, nationally…double this number for our area) 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. I completely agree when the experts say prices will continue to climb in the years ahead, even if at a slower pace. If you’re ready to buy, doing so sooner is 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 talk. I have a great network of lenders I can connect you with to understand your purchase power.