In recent years, home values have appreciated in many areas of the country, but now it appears that appreciation is beginning to slow down. This has been beneficial for sellers, as they can now list their homes at higher prices and make a larger profit from them.
At the end of 2019, the S&P CoreLogic Case-Shiller National Home Price Index revealed that home prices had appreciated by 2.8 percent. The same index showed that during the first quarter of 2020, home prices were up 4 percent year-over-year. However, the U.S. National Association of Realtors reported that existing home sales decreased 6.7 percent in March year-over-year. In addition, sales of newly built single-family homes decreased 14.5 percent in March from the previous year. This decrease indicates that homebuyers are becoming more cautious in their home purchases.
Another factor influencing the slowing of home appreciation is the availability of housing inventory. Many potential homeowners are unable to find homes they want due to limited inventory. This could be an indication of over-inflated prices from homeowners asking for too much, as buyers are more likely to wait and find a more affordable option with more choices of homes to pick from. In addition, household formation rates in 2019 were lower than in previous years, indicating a drop in potential buyers.
Despite the decrease in appreciation, the market is still healthy. For starters, interest rates are at all time lows, making it more attractive for buyers to purchase homes since their monthly payments will remain low for some time. In addition, many states are now allowing for remote closings so that buyers and sellers who are unable to attend a traditional closing can still reach a deal. This has made it easier for buyers to purchase homes in different cities and states without having to travel.
Overall, the market is still healthy but potential buyers are being more cautious in their decisions while sellers have the power to ask for higher prices. It’s important to stay informed of the current market trends and conditions to ensure both buyers and sellers understand what to expect when buying or selling a home.
In summary, the real estate market is in constant flux, and currently appreciation is slowing. This has been beneficial for sellers, as they can now list their homes at higher prices and make a larger profit. Factors such as the decreased sales of existing and newly built homes, limited inventory, and lower household formation rates have all contributed to the slowing of appreciation. Despite the decrease, the market is still healthy as interest rates are low and many states are allowing for remote closings. This means buyers that are unable to attend a traditional closing can still get deals done. Overall, staying informed of market trends is essential for both buyers and sellers to understand their options.
This article was contributed on Dec 25, 2023
