Every quarter, the Home Price Expectancy Survey (HPES) comes out with their thoughts on where the housing market is headed. Based on what’s been going on recently, the chart below may shock you.
The narrative is that home prices may decelerate, but will not depreciate. And that is a big idea.
You see, most conversations about real estate today are about “when” the housing market will crash. I’d say almost every prospective buyer asks the same question, “Are home prices slowing down?”
As I’ve been saying for the last year, that’s the furthest thing from happening. The supply vs demand equation is still lopsided – lack of supply with continued strong demand. (I’ve yet to write about the strength of the millennial buyers and what they bring to the real estate table the next few years)
Of course, we’re now seeing inventory rise fast, while mortgage rates scream above 6% this June. (Mortgage lenders are twiddling their thumbs right now as mortgage applications have fallen off a cliff).
So I’m seeing initial signs of the supply/demand situation starting to change. I also see daily home prices reduce and Days On Market increase.
All this is a sign of a market decelerating from a market that was going Mach IV. But the big idea, the idea from 30,000 feet, is the housing markets economics should stay in tact for a few years to come.
You see, this real estate market is nothing like the 2007-2009 debacle. Yet too many folks like to compare today to back then. Why, is a good question. Back then there was inventory galore. Back then you’d have dozens of properties fall onto your lap by your agent and it’d be hard to choose which on to buy… or perhaps how many.
And comparing today home prices to the great recession years just makes no logical sense. Everything about our economy today is a one-eighty from then.
Where Are Home Prices Heading Now?
As you can see in the headline chart, some groups believe there will still be increasing home prices until at least 2025. They base this conclusion on the lack of supply that appears to have years of pent up demand continuing. You can see what Fortune has to say here. And there’s more details to consume from Forbes.
Here in Florida we’re seeing even our own version of decelerating home prices. In the Florida Realtors magazine article “Florida Unlikely to Feel Impact from Slowing Market”, they site example after example of how cities throughout the state are breaking records with home prices like no other state.
And even in Florida, more and more millennials are moving there to capitalize on the states job growth market and of course, the lifestyle. This buyer group is creating a huge impact on home prices whether it’s in Florida or other no state income states.
The millennial age group is now in their family formation years. These folks are needing to buy homes and some will soon need to up-size their space to larger homes. This adds more pressure on the supply side. Homebuilder will not be able to fill this massive demand over the next 4 years.
That’s a far cry from how destructive inflation is… and how the stock market has been treating you lately. Real estate still remains the best place to put your money.
So if you’re waiting for home prices to fall anytime soon, don’t compare today to 2008. And don’t listen to what folks say at cocktail parties. Stick with economic fundamentals. These show with clarity how home prices should continue growing, albeit slower through 2025. I remain steadfast in the notion there will be no housing crash soon.
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