What Does the Future Hold for Home Prices?

JOHN RICE ASSOCIATE BROKER | REALTOR

What Does the Future Hold for Home Prices?

What Does the Future Hold for Home Prices? | Simplifying The Market

Home prices are at the top of everyone’s minds. Can they maintain their current pace of appreciation? Will rising mortgage rates negatively impact home values? Will the next economic slowdown cause prices to crash?

Let’s try to answer these questions based on what has happened in the past as well as what we know about the current real estate market.

The Impact of Rising Interest Rates

We explained earlier this year that rising mortgage rates have not negatively impacted home prices in the past and probably wouldn’t this time either. Freddie Mac’s comments were very direct:

“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

They were correct. So far this year, home values have continued to appreciate above normal historic percentages and it appears the gradual increase in rates has had little impact on prices.

The Impact of an Economic Slowdown

Many people fear that when the economy turns, we may see the same depreciation in home values as we did a decade ago.

However, we recently reported that the same group of economists, real estate experts, and investment & market strategists who predicted the next recession will occur in the next 18-24 months have also projected that house prices will continue to appreciate for the next five years, albeit at smaller percentages.

It Comes Down to Supply and Demand

As always, home prices will be determined by the demand to purchase compared to the available inventory of homes for sale. For the last six years, demand has far exceeded the available supply which has resulted in the average annual appreciation to top 6% since 2012. That is far greater than the historic norm of 3.6% annual appreciation that we saw prior to the housing boom.

There are currently small signs that housing inventory is slowly beginning to increase. Months supply of houses for sale matched last year’s numbers for the last two months after 37 consecutive months of decreasing inventory. New construction data has also shown positive signs that inventory will be increasing.

As inventory begins to meet demand, we will see appreciation return to more normal levels. We are already seeing projections coming in lower than the 6.2% annual average we have seen more recently.

CoreLogic is predicting that home values will appreciate by 5.1% over the next twelve months and the Home Price Expectation Survey calls for values to increase by 4.2% in 2019.

Bottom Line

Mark Fleming, Chief Economist at First American, explained it best:

“We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”

Where is your house headed? How about the area you are interested in moving too? Message John to find out:

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Source: Michigan Real Estate Updates

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We moved to the Grand Rapids area 11 years ago and John was very patient as we found our first home and made the experience absolutely seamless! When we were ready to sell and buy again we knew to reach out to John. As we remembered and appreciated, John is an absolute professional and was and advocate for our best interests at all times during this wild market. We found great value in our new home and he helped us get top dollar for our sale. Grateful to have him on our side though the whole process. You won’t be disappointed!
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We have worked with John multiple times now, both buying and selling homes. We 100% recommend him and he’ll always be our go-to realtor for any future real estate needs. John is experienced in the industry and well-known and respected. He is extremely professional and knowledgeable, on top of being an all-around nice guy. He is responsive and answered all of our questions along the way. We asked John for several referrals for other services (lender, cleaner, etc.) and we were very happy with all his suggestions. John is honest and will listen to your concerns/opinions. He is never pushy, but gives great advice based on his years of experience. We are so thankful for the guidance we received from John to make our recent home buying and selling experience successful and quick! If you need a realtor, call John.
G&E Webb
Purchased and sold with John, he is: Professional, an extremely good communicator, precise, and acted on our behalf 24/7. He kept us up to date on listings for purchase and preparation advice for selling our home. He was knowledgeable about neighborhoods. Photography for sale of our house was impressive. We were appreciative of the guidance regarding making offers, inspections, when to list our home, writing contracts, detailed review and presentation of offers on our home and being realistic about our purchase of new home. Great experience, Great Realtor.
J&G Junod
John helped us sell our house when we moved out of Grand Rapids 3 years ago and recently helped us purchase a new house when we moved back. He is very professional and knowledgeable of the area and market. I would recommend him to anyone looking to buy or sell.
S&K Weber
We have worked with John to sell 1 home and buy 2 homes and he is an incredible realtor! He is professional, prompt with communication, honest and patient. We had quite the list for what we were looking for and John was always available to answer questions and get us in to look at a home. His knowledge and connections in the industry made both the buying and selling process go smoothly. We simply cannot recommend John enough!
Chase and Nicole O
It was a wonderful experience working with John. His professionalism, honesty, experience, and knowledge of the Grand Rapids market, helped us in multiple ways. John sold our home in one day, was honest about what we could expect from offers, and was spot on. As we progressed toward finding our new home, again, he was extremely knowledgeable about the neighborhoods, home values, and history of the homes. We are more than happy to say, that he helped us find our dream home within our budget! Anything I needed, he was there through emails, texts, or phone calls. He definitely put in a lot of work for us. Without a doubt, I will ask for his assistance again when the time comes. Thank you John!
T&A Lascari
John Rice is hands down one of the best realtors in the Grand Rapids and surrounding areas. We have utilized him as our realtor on two separate occasions, once over 10 years ago, and again over the last several months to buy/sell. He is incredibly knowledgeable and uses his expertise to help guide you in your choices throughout the realty process. He is professional, kind, has impeccable attention to detail, responsive, and clearly loves what he does. Choose John for your realty needs…he is the best of the best!
Amanda W
We can’t say enough good things about John. He is an awesome realtor! We bought our home with his help and just recently sold it with his help. He is highly knowledgeable about the Grand Rapids area market and his expertise and professionalism has shown through both times we worked with him...John is a wonderful communicator and a genuine person. His sincerity has been evident in his commitment to making the purchase and sale experience as seamless and informed as possible. We consider ourselves incredibly fortunate to have worked with John and strongly recommend him without reservation!
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