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 graph below helps tell the story of why there still aren’t enough homes on the market today. It uses data from the Census to show the number of single-family homes that were built in this country going all the way back to the 1970s.
The blue bars represent the years leading up to the housing crisis in 2008. As the graph shows, right before the crash, homebuilding increased significantly. That’s because buyer demand was so high due to loose lending standards that enabled more people to qualify for a home loan.
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 (see graph below):
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.
Atlanta Market Update
Some of this information comes at a more National level look, and we all know that real estate is local, and all about location, location, location!
Key housing metrics, including the median sales price, swung to negative territory in Atlanta on a month-over-month basis in June, Georgia MLS reported, citing its 12-county Housing Market Snapshot.
The median price for a home in Atlanta’s core market fell 2.1% to $403,169 from $412,000 in June. Year over year, the median price was up 15.5%.
Atlanta-area home sales by dollar volume fell in July, dropping 18.9% month over month and 15% year over year to $2.84 billion.
The number of houses sold in July was 5,918, down 16.9% from June and 27% from July 2021.
New listings in July totaled 9,268, a 14.1% decrease from June and a 5.3% increase from last July, while active listings jumped 15.9% month over month and 57.1% year over year to 11,970.
Georgia MLS’ 12-county report includes Cherokee, Clayton, Cobb, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Paulding and Rockdale counties.
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.