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What’s Causing Ongoing Home Price Appreciation?

Tuesday, July 26, 2022   /   by Laura Larson

What’s Causing Ongoing Home Price Appreciation?

If you’re thinking about making a move, you probably want to know what’s going to happen to home prices for the rest of the year. While experts say price growth will moderate due to the shifting market, ongoing appreciation is expected. That means home prices won’t fall. Here’s a look at two key reasons experts forecast continued price growth: supply and demand.

While Growing, Housing Supply Is Still Low
Even though inventory is increasing this year as the market moderates, supply is still low. The resulting oversupply of homes for sale led to prices dropping during the crash and some builders leaving the industry or closing their businesses – and that led to a long period of underbuilding of new homes. And even as more new homes are constructed this year and in the years ahead, this isn’t something that can be resolved overnight. It’ll take time to build enough homes to meet the deficit of underbuilding that took place over the past 14 years.

Millennials Will Create Sustained Buyer Demand Moving Forward
The frenzy the market saw during the pandemic is because there was more demand than homes for sale. That drove home prices up as buyers competed with one another for available homes. And while buyer demand has moderated today in response to higher mortgage rates, data tells us demand will continue to be driven by the large generation of millennials aging into their peak homebuying years.

Odeta Kushi, Deputy Chief Economist at First American, explains: “...millennials continue to transition to their prime home-buying age and will remain the driving force in potential homeownership demand in the years ahead

That combination of millennial demand and low housing supply continues to put upward pressure on home prices. As Bankrate says: “After all, supplies of homes for sale remain near record lows. And while a jump in mortgage rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials.”

What This Means for Home Prices
If you’re worried home values will fall, rest assured that experts forecast ongoing home price appreciation thanks to the lingering imbalance of supply and demand. That means home prices won’t decline.

Bottom Line
Based on today’s factors driving supply and demand, experts project home price appreciation will continue. It’ll just happen at a more moderate pace as the housing market continues its shift back toward pre-pandemic levels. Contact Laura Larson now!
Larson Fine Properties
Laura Larson
7294 Joffa Circle
Warrenton, VA 20187
703-743-4410

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