It’s truly hard to believe that it was two years ago that a worldwide pandemic fundamentally changed the world. The housing market was certainly not immune to that. Let’s take some time to answer some of those burning questions about the real estate market.
Prior to the pandemic, a normal year of home price appreciation was about 3.8%. Corelogic reported this number at 6% in 2020. Really significant. Then last year, we saw more than double the home price appreciation in 2020. Incredible home price appreciation over the past two years. Why? Mostly because of supply and demand – there are more buyers in the market than homes available.
Home prices are still accelerating. The most important thing to understand when we hear the experts predict home price “deceleration” is that this means homes will continue to appreciate, but at a slower, more moderate rate. Deceleration does NOT equal depreciation.
The average of the 7 expert forecasts for home price appreciation in 2022 is 6.1%. The reality is that if we continue to see low inventory, we will likely see these forecasts trend upward. Six to seven months inventory on the market is the perfect balance of supply and demand. Less inventory is a seller’s market, and more inventory is a buyer’s market.
New listings in Tallahassee seem to be failing pretty significantly over the past year. With 77% of consumers (according to a recent realtor.com study) feeling like their market is in a housing bubble, it is important now, more than ever, to be informed. So… let’s tackle that perspective.
Inventory of homes today is nothing like the last time. It was a buyer’s market in the years leading up to the housing crash – we had an oversupply of homes. Today, we are seeing record lows. Inventory is in a totally different place today, and the demand is more than the market can handle.
Credit scores are nothing like the last time either, and were, quite frankly, one of the leading causes of the housing bubble. Between 2003 and 2007, significantly more loans were issued to buyers who had a credit score less than 620. Since then, lending standards have gotten much tighter.
Homeowners have significantly more equity today, so they’re in a much better financial situation. In addition, forbearance helped homeowners to the point in which we will not see a wave of foreclosures come to the market.
These are all the wonderful reasons we are not in a housing bubble.
Let’s wrap up this month by touching on net worth and the long-term financial benefits of owning a home. In addition to stability, there is a sense of financial security in homeownership. According to the National Association of Realtors®, the average net worth of a homeowner today is $300,000, while the average net worth of a renter is $8,000. That’s staggering. Again, homes will continue to appreciate in value, allowing buyer’s to take advantage of that equity gain.
Home prices are still accelerating, and may continue rising as a direct result of supply and demand. The market data simply does not support that we are in a housing bubble. Despite the rising prices, it is still a good time to buy, since homes are not predicted to depreciate, only appreciate at a slower, more moderate rate.
Tallahassee Market Statistics