Are We Heading For a Housing Crash?
Penned by Allison Larson, founder of Novus Home Mortgage.
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 the other week on this topic:
“. . . 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 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, investment and market strategists. It is forecasting that home prices will continue appreciating over the next five years. Below are the expected year-over-year rates of home price appreciation estimates 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 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.
If you are trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. If you’re ready to buy, doing so now may be your best bet for your wallet and your long-term wealth. I’d love to connect and see how I can help!
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allison larson of novus home mortgage
Allison’s social character is what drives her to build such a strong foundation with her clients from day one. She believes fostering current relationships, while continuously extending a hand to new affiliations is what keeps her professional life successful and exciting. By creating an environment where people feel comfortable asking questions and expressing their housing goals, she’s able to cater her methods to each unique individual.
Allison leads the Novus Home Mortgage team of local mortgage experts, and is always open to connect and provide advice Follow along with @mplsmademortgage on Instagram, or at allisonlarsonloans.com.
