As we enter the final months of 2020 and continue to work through the challenges this year has brought, some of us wonder what impact continued economic uncertainty could have on home prices. Looking at the big picture, the rules of supply and demand show that home values are projected to keep rising.
Due to the undersupply of homes on the market today, there’s upward pressure on prices. Consider simple economics: when there is 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 bidding wars, which will also drive price points higher in the home sale process.
Home Price Appreciation Forecasts
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 released in the last 60 days:
As you can see the forecasts for home price appreciation ranging from as low as 0.2% to as high as 7% for over the next 12 months.
I hear many foreclosures might be coming to the market soon. Won’t that drive prices down?
The are 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, was very firm in a podcast last week:
“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.
Originally, many thought home prices would depreciate in 2020 due to the economic slowdown from the coronavirus. Instead, home prices appreciated substantially. Over the next year, home values are projected to keep rising even higher given the continued lack of inventory of homes for sale. Let’s talk today about what’s happening in your local market.
I am committed to the real estate market to make sure you have all the information you need to make your next move. Review all the information I have put together for you here on my website. If you would like more information on any issues of concern as well please contact me. I look forward to hearing from you. Have a great day.