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Home Price Deceleration Doesn’t Mean Home Price Depreciation
Experts in the real estate industry use a number of terms when they talk about what’s happening with home prices. And some of those words sound a bit similar but mean very different things. To help clarify what’s happening with home pricesand where experts say they’re going, here’s a look at a few terms you may hear:
- Appreciation is when home prices increase.
- Depreciation is when home prices decrease.
- Deceleration is when home prices continue to appreciate, but at a slower pace.
Where Home Prices Have Been in Recent Years
For starters, you’ve probably heard home prices have skyrocketed over the past two years, but homes were actually appreciating long before that. You might be surprised to learn that home prices have climbed for 122 consecutive months (see graph below):
As the graph shows, houses have gained value consistently over the past 10 consecutive years. But since 2020, the increase has been more dramatic as home price growth accelerated.
So why did home prices climb so much? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was high and supply was low.
Where Experts Say Home Prices Are Going
While this is helpful context, if you’re a buyer or seller in today’s market, you probably want to know what’s going to happen with home prices moving forward. Will they continue that same growth path or will home prices fall?
Experts are forecasting ongoing appreciation, just at a decelerated pace. In other words, prices will keep climbing, just not as fast as they have been. The graph below shows home price forecasts from seven industry leaders. None are calling for prices to fall (see graph below):
Mark Fleming, Chief Economist at First American, identifies a key reason why home prices won’t depreciate or drop:
“In today’s housing market, demand for homes continues to outpace supply, which is keeping the pressure on house prices, so don’t expect house prices to decline.”
And although housing supply is starting to tick up, it’s not enough to make home prices decline because there’s still a gap between the number of homes available for sale and the volume of buyers looking to make a purchase.
Terry Loebs, Founder of the research firm Pulsenomics, notes that most real estate experts and economists anticipate home prices will continue rising. As he puts it:
“With home values at record-high levels and a vast majority of experts projecting additional price increases this year and beyond, home prices and expectations remain buoyant.”
Bottom Line
Experts forecast price deceleration, not depreciation. That means home prices will continue to rise, just at a slower pace. Let’s connect so you can get the full picture of what’s happening with home prices in our local market and to discuss your buying and selling goals.
Luxury Homes Are in High Demand
As people realize their needs are changing, some are turning to luxury housing to find their dream home. Investopedia helps define what pushes a home into this category. In a recent article, they point out that a luxury home isn’t only defined by its price. Location is also an important factor. It could be a condo at a desirable city address, a spacious home on the water, or one with access to luxury activities like arts and entertainment, high-end shopping and dining, and more. The home itself will also boast some of the finest features available.
According to the Luxury Market Report from the Institute for Luxury Home Marketing, there’s been a substantial increase in how many buyers are purchasing luxury homes over the past two years. It says:
“. . . North America recorded the fastest growth of demand during the first year of the pandemic. Also, demand has . . . consistently increased, and even in April 2022, we saw a higher volume of sales compared to 2021.”
If you own a luxury home, it could be a great time to list your house today while demand is so high. But first, let’s understand where the demand is coming from.
What’s Driving the Heightened Buyer Demand for High-End Homes?
The same report says more people have reached a certain net-worth threshold, and that’s contributing to the increased interest in luxury housing:
“In 2020, we saw a 2.2% growth in the number of individuals with wealth of over $5 million in net value, but in 2021 that number grew by an outstanding 19.8%.
This total increase has resulted in the introduction of over 660,000 new individuals into the high net-worth bracket, which, combined with the existing affluent looking to both diversify and add new properties to their portfolio, provides a true insight into why the demand for luxury properties skyrocketed during 2021 and into 2022.”
So, if you’re looking to make changes to your real estate portfolio or are looking to sell your current house, it may be a great time to list and benefit from the high demand for luxury homes today.
Bottom Line
If you own a luxury home and want to know how strong demand is in your area, let’s connect so you can capitalize on current market conditions while buyer demand for upscale homes is so high. Rhode Island continues to be a highly sought-after “move to” location by buyers internally and those coming in from MA, NY, and CT. Reach out to this born and raised RI Realtor to strategize!
How to maximize a gorgeous Saturday in the Ocean State!
These are the days!!! These are the days we, in the Ocean State, arise with a smile on our faces and a pep within our “gate!”
Seeking some “idears” on what to do today? Check out today’s blog for a game plan which includes a BEVVIE of local hot spots to hit so you can maximize all the opportunities existing within this ideal weather day by the BAY!
https://parkbench.com/blog/ultimate-saturday-game-plan-in-little-rhody
Will Home Prices Fall This Year? Here’s What Experts Say.
Many people are wondering: will home prices fall this year? Whether you’re a potential homebuyer, seller, or both, the answer to this question matters for you. Let’s break down what’s happening with home prices, where experts say they’re headed, and how this impacts your homeownership goals.
What’s Happening with Home Prices?
Home prices have seen 121 consecutive months of year-over-year increases. CoreLogic says:
“Price appreciation averaged 15% for the full year of 2021, up from the 2020 full year average of 6%.”
So why are prices climbing so much? It’s because there are more buyers than there are homes for sale. This imbalance is expected to maintain that upward pressure on home prices because homes for sale are a hot commodity in today’s low-inventory housing market.
Where Do Experts Say Prices Will Go from Here?
Experts say the housing market isn’t set up for a price decline due to that ongoing imbalance between supply and demand. In the latest home price forecasts for 2022, they’re calling for ongoing appreciation throughout the year (see graph below):
While the experts are forecasting more moderate price appreciation, the 2022 projections show price gains will remain strong throughout this year. First American explains it like this:
“While house price growth is expected to moderate from the rapid pace of 2021, strong home buyer demand against a backdrop of historically tight inventory of homes for sale will likely keep appreciation positive in the coming year.”
What Does That Mean for You?
The biggest takeaway is that none of the experts are projecting depreciation. If you’re a homeowner thinking about selling, the higher price appreciation over the last two years has been great for your home’s value, but it’s also something you should factor in when planning your next steps. If you’ll also be buying a home after selling your current house, you shouldn’t wait for prices to fall. Waiting will only cost you more in the long run because climbing mortgage rates and rising home prices will have an impact on your next home purchase. Freddie Mac says:
“If you’re thinking about waiting until next year and that maybe rates are higher, but you’ll get a deal on prices – well that’s risky. It may be more advantageous to purchase this year relative to waiting until 2023 at this time.”
Bottom Line
If you’re thinking of selling to move up, you shouldn’t wait for prices to fall. Experts say prices will continue to appreciate this year. That means, if you’re ready, buying your next home before prices climb further may make the most financial sense. Demand continues to be incredibly high here in RI and until that lessens, prices will continue to escalate. Let’s connect to begin the process of selling your current home and looking for your next one before prices rise higher!
2022 Housing Market Forecast
While the Fed hopes to Calm Demand in order to Curb Inflation, the market will continue to be strong here in RI and elsewhere. I do believe the higher interest rates WILL in fact impact demand and home appreciation will lessen a bit. From all that I listen to, I believe prices will decrease @5-10% in our local RI market but not for quite some time. We simply still have incredible demand and very little supply of inventory.
![2022 Housing Market Forecast [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2022/05/05130426/20220506-MEM-1046x1885.png)
Some Highlights
- What does the rest of the year hold for the housing market? Here’s what experts have to say about what lies ahead.
- Home prices are projected to rise and so are mortgage rates. Experts are also forecasting another strong year for home sales as people move to meet their changing needs.
- Let’s connect so you can make your best move this year. I am here to help!
Today’s Home Price Appreciation Is Great News for Existing Homeowners
If you’re planning to sell your home this season, rising prices are great news for you. But it’s important to understand why prices are rising to begin with. One major factor is supply and demand.
In any industry, when there are more buyers for an item than there are of that item available, prices naturally rise. In those situations, buyers are willing to pay more to get the product or service they’re looking for when options are scarce. And that’s exactly what’s happening in the current real estate market.
Selma Hepp, Executive, Research & Insights and Deputy Chief Economist at CoreLogic, puts it like this:
“With so few homes, buyers are once again left with fierce competition that’s driving the share of homes that sold over the listing price up to 66% . . . With the continued imbalance between supply and demand, home prices are likely to have another year of strong gains and are expected to average about 10% growth for the year.”
Because it will take some time for housing supply to increase, experts believe prices will continue rising. The latest Home Price Expectations Survey forecasts what will happen with home prices over the next 5 years. As the graph below shows, while the rate of appreciation will moderate over the next few years, prices will continue rising through 2026:
What This Means When You Sell Your House
If you’re a homeowner, the projection for continued price appreciation this year opens up an opportunity to move. That’s because it may give your equity a major boost. Equity is the difference between what you owe on your house and its market value. The amount of equity you have increases as you make your monthly payments and as rising home prices drive up the market value for your home.
Growing equity is a powerful tool for homeowners. When you sell your house, the equity you’ve built comes back to you in the sale. That money could be enough to cover some (if not all) of your down payment on your next home.
Of course, if you want to know how much equity you have in your current house, it’s crucial to work with a real estate professional. They follow current market trends and can help you understand your home’s value when you’re ready to sell.
What This Means for Your Next Purchase
But today’s rising home values aren’t just good news if you’re ready to sell. Because price appreciation is forecast to continue in the years ahead, you can rest assured your next home will be an investment that should grow in value with time. That’s one of several reasons why real estate has been rated the best investment in a recent Gallup poll.
Bottom Line
If you’re weighing whether or not you should sell your house this season, know rising home values may be opening up an opportunity to use equity to fuel your move. Let’s connect so you can find out how much your home is worth and to learn more about all the benefits you have in today’s market. Here to help you strategize in today’s competitive real estate market in Rhode Island!
Where Are Mortgage Rates Headed?
A headline that hints at a favorite Dave Matthews Band song of mine ” Where are we going.”
Interest rates and the rising of them, are a hot topic amongst my buyers AND sellers these days. How will they impact affordability? Will they have an effect on the incredible home price appreciation we have been experiencing in RI? I always go back to the notion of affordability as it relates to my client’s monthly mortgage payments. That is the number we need to be cognizant of especially with home prices sky high and mortgages rates increasing. What is your debt to income ratio in light of the rate you will lock into AND that purchase price? THAT is where the focus needs to be aimed; now more than ever.
Let’s drill down on mortgage rates and where they are heading.
There’s never been a truer statement regarding forecasting mortgage rates than the one offered last year by Mark Fleming, Chief Economist at First American:
“You know, the fallacy of economic forecasting is: Don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”
Coming into this year, most experts projected mortgage rates would gradually increase and end 2022 in the high three-percent range. It’s only April, and rates have already blown past those numbers. Freddie Mac announced last week that the 30-year fixed-rate mortgage is already at 4.72%.
Danielle Hale, Chief Economist at realtor.com, tweeted on March 31:
“Continuing on the recent trajectory, would have mortgage rates hitting 5% within a matter of weeks. . . .”
Just five days later, on April 5, the Mortgage News Daily quoted a rate of 5.02%.
No one knows how swiftly mortgage rates will rise moving forward. However, at least to this point, they haven’t significantly impacted purchaser demand. Ali Wolf, Chief Economist at Zonda, explains:
“Mortgage rates jumped much quicker and much higher than even the most aggressive forecasts called for at the end of last year, and yet housing demand appears to be holding steady.”
Through February, home prices, the number of showings, and the number of homes receiving multiple offers all saw a substantial increase. However, much of the spike in mortgage rates occurred in March. We will not know the true impact of the increase in mortgage rates until the March housing numbers become available in early May.
Rick Sharga, EVP of Market Intelligence at ATTOM Data, recently put rising rates into context:
“Historically low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach five percent on a 30-year fixed rate loan, more consumers are going to struggle to find a property they can comfortably afford.”
While no one knows exactly where rates are headed, experts do think they’ll continue to rise in the months ahead. In the meantime, if you’re looking to buy a home, know that rising rates do have an impact. As rates rise, it’ll cost you more when you purchase a house. If you’re ready to buy, it may make sense to do so sooner rather than later.
Bottom Line
Mark Fleming got it right. Forecasting mortgage rates is an impossible task. However, it’s probably safe to assume the days of attaining a 3% mortgage rate are over. The question is whether that will soon be true for 4% rates as well. Care to drill down on what buying and selling look like for you in this ever-changing RI real estate market? Reach on out. I am here to help!
Home Price Appreciation- What does it mean to you as a homeowner and/or as a buyer?
Home Price Appreciation-
What does it mean to you as a homeowner AND what does it mean to you as a buyer?
It’s a topic of great interest in this competive real estate market where home price escalation and appreciation are at an all-time high.
The Future of Home Price Appreciation and What It Means for You
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 crash15 years ago.
However, 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.”
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, 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 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 (see graph below):
Bottom Line
If you’re trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. Experts say prices will continue to climb in the years ahead, just at a slower pace. So, if you’re ready to buy, doing so now may be 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, reach out to me today. I am here to help with all your RI and Southeastern MA real estate needs and dreams!
One of the four market forces we are dealing with in RI real estate ….
One topic I touched upon during a recent real estate panel detailed the market forces of 2021 which led to the extremely high price growth which are still in effect today.
The four forces are limited supply, elevated demand , demographics and low mortgage rates. Here is a national look at the supply / demand imbalance we are currently dealing with
![Supply and Demand in Today’s Market [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2022/03/03164955/20220304-MEM-1046x2586.png)
Some Highlights
- Today’s housing market is the direct result of low supply and high buyer demand. Here’s what that means for you and your plans to buy or sell.
- For buyers, expect competition, be ready to move fast, and be prepared to submit your strongest offer. For sellers, know your house will be the center of attention and that it’ll likely sell quickly and get multiple offers.
- If you’re ready to move, let’s connect to talk about our local area and how you can take advantage of today’s unprecedented housing market.
There are Almost No Houses For Sale in Rhode Island
https://www.golocalprov.com/business/there-are-almost-no-houses-to-buy-in-ri
