Home Price Appreciation Is on the Rise

Due to the undersupply of homes on the market today, there’s significant upward pressure on home prices. When there’s high demand for an item and a low supply of it, consumers are willing to pay more for that item. That’s what’s happening in today’s real estate market. The housing supply shortage is also resulting in more bidding wars, which drive price points higher in the home sale process – a big win for sellers.

In addition, there’s no evidence that buyer demand will wane. As a result, experts project home price appreciation will continue over the next twelve months. Here’s a graph of the major forecasts going forward.

I hear many foreclosures might be coming to the market soon. Won’t that drive prices down?

Some are concerned that homeowners who entered a mortgage forbearance plan might face foreclosure once their plan ends. However, when you analyze the data on those in forbearance, it’s clear the actual level of risk is quite low.

Ivy Zelman, CEO of Zelman & Associates and a highly-regarded expert in housing and housing- related industries, notes:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

With demand high, supply low, and little risk of a foreclosure crisis, home prices will continue to appreciate.

Bottom Line

Originally, many thought home prices would depreciate due to the economic slowdown from the coronavirus. Instead, prices appreciated substantially. Over the next year, home values will likely rise even higher given the continued lack of inventory of homes for sale.