Part 3: Home Prices… Inflation, Appreciation, Values. What’s happened and what to expect.
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Home Prices: Percent increase and predictions
We won’t know exactly how much home prices went up in 2023 until all the figures are in, usually sometime during 1st quarter, but here’s what’s being reported so far…
According to Statista, home prices in the US have risen for 11 consecutive years. 2021 saw the highest average increase for one year, at 18%. Freddie Mac reports that in 2023 on average home prices increased at 3%, but remember, that’s year over year.
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According to CoreLogic, and Case-Shiller indexes, home prices in the US increased 3.9% in 2023, but these are averages.
Many cities saw far greater increases this year: (CNBC)
The following cities had year-over-year median home price increases of 10% or more since September of 2022: (interestingly, only the first 2 are coastal).
Los Angeles +23.8%
San Diego +18.2%
Richmond, VA +15%
Boston +14 %
Columbus, Oh + 12%
Rochester, Ny + 11.4%
Chicago, +10%
Indianapolis, +10%
It’s also interesting that all of these towns with 10% or higher year-over-year increase had experienced a leveling off or decrease in the 2nd half of 2022, when the rate shock was fresh.
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Median home prices in both LA and San Diego increased by 38% and 48% respectively since January of 2020. (realtor.com)
So what about places like Columbus, Indianapolis, Richmond, and Rochester? The common thread is affordability, with each of those towns averaging $416,000. (US Census data) Demand there is high and affordability isn’t crazy.
So will prices keep going up in 2024? By how much?
According to both Zillow as well as NAR’s economist Lawrence Yun, prices should increase an average of 3 to 4% in 2024.
Our predictions? Unlike the crazy pandemic market, where very different regions and cities acted very similarly with crazy appreciation, everything getting multiple offers, waived appraisals, and inspections, 2024 will see different trends in different places. Real estate prices will be very dependent on local trends versus national ones.
Watch your MLS hot sheets every day so you’ll detect local trends. You’ll need to know what’s hot and what’s not for each buyer, for each seller. Maybe home prices in your town will go up by 10%, but one county away could be stagnant.
The old adage that ‘real estate is like the weather…it’s very local’, is now true again. Knowledge = confidence, ignorance = fear. Be the one with all the knowledge and speak from fact, not speculation.
Does this moderation of prices mean that 2024 will be a Buyer’s Market, a Seller’s Market, or a Balanced Market?
As long as demand is stronger than supply due to low inventory, it will remain a seller’s market. Until our inventory increases significantly, versus incrementally, it will remain a seller’s market, though less frenzied than during the pandemic.
It will certainly feel more balanced with investors, flippers, and some first-time buyers deciding to stay on the sidelines and wait for more inventory and more favorable rates.
The expectations of both buyers and sellers will continue to change. Well-qualified, motivated buyers are what motivated sellers are looking for. The meeting of the minds may include seller’s concessions, helping buyers buy down interest rates or even taking a home sale contingency in some cases.
The negotiation power will continue to swing a bit more toward the buyer side of the transaction, without swinging the pendulum completely to their side. With a bit more inventory comes more choices and that includes new construction in some markets. Sellers should think twice before they turn down a full-price, all cash or strong financing offer hoping to get a bidding war next week or next month.
We’re hearing a familiar script again…’ usually your first offer is your best offer!’
Agents will have to be more careful in how they price a listing in the first place if they still want it sold quickly and for full list price.
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