If you’re looking to buy or sell a house, chances are you’ve
heard talk about today’s rising home prices. And while this increase in home
values is great news for sellers, you may be wondering what the future holds.
Will prices continue to rise with time, or should you expect them to fall?
To answer that question, let’s first understand a few terms
you may be hearing right now.
·
Appreciation is an increase in the value of an
asset.
·
Depreciation is a decrease in the value of an
asset.
·
Deceleration is when something happens at a
slower pace.
It’s important to note home prices have increased, or
appreciated, for 114 straight months. To find out if that trend may continue,
look to the experts. Pulsenomics surveyed over 100 economists, investment
strategists, and housing market analysts asking for their five-year
projections. In terms of what lies ahead, experts say the market may see some
slight deceleration, but not depreciation.
Here’s the forecast for the next few years:
As the graph above shows, prices are expected to continue to
rise, just not at the same pace we’ve seen over the last year. Over 100 experts
agree, there is no expectation for price depreciation. As the arrows indicate,
each number is an increase, which means prices will rise each year.
Bill McBride, author of the blog Calculated Risk, also
expects deceleration, but not depreciation:
“My sense is the Case-Shiller National annual growth rate
of 19.7% is probably close to a peak, and that year-over-year price increases
will slow later this year.”
Ivy Zelman of Zelman & Associates agrees, saying:
“. . . home price appreciation is on the cusp of flipping
to a decelerating trend.”
A recent article from realtor.com indicates you should
expect:
“. . . annual price increases will slow to a more normal
level, . . .”
What Does This Deceleration Mean for You?
What experts are projecting for the years ahead is more in
line with the historical norm for appreciation. According to data from Black
Knight, the average annual appreciation from 1995-2020 is 4.1%. As you can see
from the chart above, the expert forecasts are closer to that pace, which means
you should see appreciation at a level that’s aligned with a more normal year.
If you’re a buyer, don’t expect a sudden or drastic drop in
home prices – experts say it won’t happen. Instead, think about your
homeownership goals and consider purchasing a home before prices rise further.
If you’re a seller, the continued home price appreciation is
good news for the value of your house. Work with an agent to list your house
for the right price based on market conditions.
Bottom Line
Experts expect price deceleration, not price depreciation
over the coming years. Let’s connect to talk through what’s happening in the
housing market today, where things are headed, and what it means for you.
Source: Real Estate with Keeping Current Matters
