The Future of Home Prices: What’s in Store?

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National Outlook and Highlights

Housing prices have continued to increase over the last few years, caused by a shortage of available homes; real estate inventories of existing and newly constructed homes have continued to be low.

The second quarter of 2018 saw a slight increase of inventory, but the supply of new homes is still relatively low, except in some of the largest metro areas.

The general concern was that the gradual hikes in interest rates would negatively impact home prices, but this has not happened, nor does it seem likely that future hikes will affect them in the near future.

There is a tendency to look back to the housing crisis of a decade ago and to how it happened due to the downturn in the economy. Economists and other experts who have predicted another recession within the next 18 months have also forecast that housing prices will most likely not be affected and that we will continue to see appreciation, even though at lower figures than now.

Experts agree that the determining factor on the direction which housing prices will take is mainly dependent on supply versus demand. With over 5 years of demand exceeding supply, we have seen an average annual appreciation of 6%, almost double to the 3, 6% of the period before the boom.

Price appreciation will slow as housing inventory increases and the predictions are that we will be seeing an average growth of 5, 1% over the next 12 months.

Even though there are likely to be further increases in mortgage rates and construction costs as we approach 2019, indications are that as we head into a worldwide recession by 2020, the U.S. economy will stay stable and it is expected that there will be increased job opportunities for our citizens.

All indications point to the continuance of the seller’s market we are in for some time to come.

Texas Outlook and Highlights

According to the Real Estate Center Texas Housing Insight Report, July 2018…

Home price appreciation moderated as a result of the supply uptick earlier this year and an increased appetite for smaller homes. The FHFA Housing Price Index for Texas rose 0.7 percent in the second quarter, the slowest rate since 2014. Nevertheless, the index indicated that Texas prices were 54 percent higher than in 2007. At the national level, home prices increased just 16 percent over the same period. In Austin and Fort Worth, the index decelerated to 0.5 and 0.6 percent, respectively, but remained 78 and 60 percent above pre-recessionary levels.

Texas builders reduced home sizes to combat rising input costs and affordability constraints. The median square footage (sf) of new homes sold through an MLS settled at 2,301 sf, down 3 percent YOY. The median price per square foot (ppsf) rose 4.7 percent YOY to $115.81. At the metro level,

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