The housing market will remain a Hot Seller’s Market for some time and home values will continue to rise.
For buyers, securing a home is exceptionally frustrating. Many are kicking themselves and wish that they could have purchased a year ago, knowing that homes have appreciated at record levels ever since. Yet, that kind of thinking is futile. Home values have gone up for decades. Rather than dwelling on the past, it is best to look at where housing is at today and where it is headed in the future.
Even with fewer available homes, demand (the last 30-days of pending sales) has been running persistently hot. The 3-year average from 2017 to 2019 is 2,363 pending sales, 10% less, or 260 fewer than today’s 2,682 level. Hot demand combined with a supply crisis has resulted in an Expected Market Time (number of days between coming on the market and opening escrow) at ultra-low, unprecedented levels. It is at 26 days today and has been stuck below the 40-day threshold since January, indicative of an insane market with tons of showings, multiple offers, selling prices above their list prices, and swift appreciation.
Knowing where the market is today and where it is headed from here is very important. When buyers qualify to purchase and are comfortable with the monthly payment, they can take heart that they are taking advantage of today’s remarkable, historically low mortgage rate environment, and that home appreciation will endure for the foreseeable future. In comparing a home purchased today for $1 million with a 20% down payment, the monthly payment is $3,313 at 2.86%. Home appreciation will slow a bit over the next year, from 20% today to about 10%. If rates stayed the same, the $1 million home would appreciate to $1.1 million in a year, and the payment would be $3,644 per month. That is $331 extra every month, or an annual increase of nearly $4,000, by holding off a home purchase for a year.
