If you’re one of the home buyers on the fence, thinking that you’d wait until the market starts to move sideways or even start heading downward, you might want to have another look at that strategy. A new report from CoreLogic says that annual growth in home prices will increase by an average of 5.4% before July of 2020. This represents a significant change in a market where price appreciation has been spotty and sluggish.
What might cause this change? Low interest rates. In early June, the S&P CoreLogic Case-Shiller index for home prices, one of the most widely quoted indicators for the national housing market, registered the slowest pace of home price growth since 2012 . (In the previous June, home prices rose at an annual rate of 6.3%.) Major housing markets – such as New York, Miami, and Seattle – experienced declining home prices, either on a monthly or annual basis. Home-price growth had become weaker as would-be buyers were priced out of these and other markets.
Then, suddenly, summer arrived! The index registered a 3.6% uptick year-over-year in July. Some parts of the country, namely Connecticut and South Dakota, were still in decline. But that’s pretty much it, according to an article by NAR’s Jacob Passy.
Recent home sales data indicates sales activity has picked up moderately as consumers seek to grab currently low mortgage rates, which have fallen throughout much of 2019 so far. Passy quotes CoreLogic’s chief economist Frank Nothaft: “With the for-sale inventory remaining low in many markets, the pick-up in buying has nudged price growth up. If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year.”
How much rise in home prices will occur? That’s difficult to predict. Passy says CoreLogic estimates that nearly 25% of the real-estate markets in metropolitan areas were undervalued (at least 10% below what it determines to be the level where supply and demand balance).
On the other side of the coin, roughly a third of markets nationwide are overvalued. In these markets, price growth could slow or even fall if enough buyers are priced out of the market again.
In my opinion, Baltimore metro is not one of these overvalued markets. Our price appreciation has been artificially slowed by measures that the state government took to mitigate the damage done during the financial crisis. At the same time, rental prices have risen steadily for the last five years, to the level that mortgages increasingly look like a bargain compared to rents. I expect that we will see healthy price appreciation here in the next ten to 12 months, on a neighborhood-by-neighborhood basis. Remember … real estate is “location, location, location.”
If you’re a buyer, this means it may be time to get off the fence and start your home search in earnest. If you’re a seller … appreciation in early 2020 is motivation to put your house up for sale in the spring market! When you need professional real estate advice, don’t hesitate to give me a call or email!
Reach Wayne Curtis of Charm City Real Estate at 410-467-8950.