Where Are Home Prices Headed in the Next 5 Years?

We can look to the Home Price Expectation Survey to get an idea of where expert economists project home values to go in the next five years both locally and nationally.

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Where are home prices headed in the southeastern Michigan market? We can find out by taking a look at the latest Home Price Expectation Survey in which expert economists were asked what will happen with prices over the next five years.

Before the bubble burst between 1987 and 1999, the national annual appreciation was 3.6% and during the bubble, that nearly doubled. During the bust, prices fell 5.4% annually. During the recent recovery from 2012 to 2016, it has been about 5%. This all basically just means that the market has recovered. Home prices in most parts of the country have reached that 2008 number or will soon reach it. 

What does this all mean?

The experts predict that we'll be below 5% appreciation this year, which would be higher than the historical 3.6% but below the appreciation in recent years. Over the next few years, appreciation will slow as the market swings the other way. Real estate values will experience lower than 3.6% appreciation according to the experts. In the video above, you can see the projection that the acceleration of appreciation will slow. The good news is that no one projects prices to fall.

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It's safe to say that now is a great time to buy a home.

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In the video, you can also see cumulative house appreciation projections through 2021. By then, they project all prices to increase.

Now let's look at what happens with the equity of an example house based on appreciation. In this example, we can see that someone who bought a house in January of 2017 would see a gain of $42,898 in appreciation by January of 2022 if the projections hold true. I think it's safe to say that now is a great time to buy a home. Core Logic also projected year-over-year appreciation broken down by state, and Michigan (5.7%) is projected to outperform the national projection (4.7%).

With home prices going up, homeowners are gaining equity. Keep in mind that if you've been thinking about making a move, you probably have positive equity because of this. If you're interested in an equity evaluation on your home or you have any questions about buying or selling a home, just give us a call or send us an email. We'd be glad to help!

How Do Current Inventory Levels Affect Home Sellers?

Housing inventory levels are at historic lows in our market, which creates a unique opportunity for home sellers this year.

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Housing inventory levels have continued to drop over the past 12 months. In fact, we have historically low inventory levels right now.

Five to seven months of inventory is considered a neutral or balanced market. For the past 60 days, we have had less than four months of inventory available on the market. 

If you compare the fourth quarter of 2016 to the fourth quarter of 2015, inventory is down across the board. We need as many home sellers as possible to enter the market now. Most homeowners want to wait another 60 to 90 days to put their homes on the market. However, if you want to wait until spring, you need to realize that your competition is waiting to do the same thing.

Every year, the second quarter gets the most listings on the market. If you wait until April, May, or June to list your house, then you will be on the market at the same time as everyone else.

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You should put your home on the market before the second quarter.

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Right now, homes are selling in an average of 55 days. The average for our team is 45 days. You can definitely sell your house now before the rest of the competition enters the market.

Even Jonathan Smoke, the chief economist at Realtor.com, says, “In most markets, most years, the optimal time to list is in the spring so that the maximum number of potential buyers view the home. This year, the conventional wisdom of buying and selling may need to change. Inventory levels at the beginning of 2017 are at multi-year lows. Sellers now face very little competition.”

If a chief economist says that you don’t want to wait until the second quarter, then you know that you should get your house on the market as quickly as possible.

If you have any other questions about housing inventory or if you are interested in selling your home, give us a call or send us an email. We would be happy to help you!