The Future of Home Price Appreciation and What It Means for You

Many people are concerned about what will happen to property values in the next years. Some fear that the recent surge in property prices may lead to a repeat of the housing crisis of 15 years ago.

Experts, on the other hand, claim that the market is now completely different. Odeta Kushi, Deputy Chief Economist of First American, for example, tweeted about this issue just last week:

“. . . 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.”

Price growth will moderate from the double-digit levels observed in the market over the last two years. Experts, on the other hand, feel that home values will not fall (where a home would lose value).

Pulsenomics just issued its latest Home Price Expectation Survey, which polled over 100 economists, real estate specialists, and investment and market strategists around the country. Home prices are expected to continue to rise over the next five years, according to the report. Based on the average of all 100+ estimates, the following are the predicted year-over-year rates of home price appreciation:

• 2022: 9%
• 2023: 4.74%
• 2024: 3.67%
• 2025: 3.41%
• 2026: 3.57%

Home price appreciation will remain very high this year (though half of what it was last year), according to those who responded to the study, before returning to more normal levels over the next four years.

How Does This Affect You as a Buyer?

It can be a difficult market to navigate as a buyer, with a limited number of homes available for sale and rising prices and borrowing rates. However, there are advantages to purchasing a home sooner rather than later. You will pay more in the future if you wait to buy. If you buy now, though, you'll be in a position to take advantage of future price increases. 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):

After you buy, rising property prices will help you increase the value of your home and, as a result, your household wealth through home equity.

Let's pretend you bought a $360,000 house in January of this year (the median price according to the National Association of Realtors, rounded up to the closest $10,000). If you consider the Home Price Expectation Survey's projection for appreciation, you may amass nearly $96,000 in household wealth over the next five years (see graph below):

Conclusion

Knowing what's predicted to happen with property prices is crucial if you're attempting to decide whether to buy now or wait. Experts predict that prices will continue to rise in the next years, although at a slower rate. It, if you're ready to buy, now might be the best time to do so in terms of saving money. It will also allow you to exploit future property price increases to increase your personal net worth through expanding equity. Let's connect right now if you're ready to get started.