Housing Price Forecast
What is ahead in home prices in 2023 and 2024? Should I buy or should I wait? When are the massive price drops coming? I’m gonna talk about what’s gonna happen in the housing market. Are the prices gonna drop or are they gonna go up? Once you know, you can decide whether you should buy now or you should wait for two years or three years or next year. Over the past few years, a very widely debated topic in housing is when will the home prices drop and how much of a drop is going to be there? Is it going to be like the crash in 2008? And we are hearing this question for this debate or this topic since 2019. We have been hearing as agents, as an individual working with buyers and sellers, I hear it all the time since 2019. But guess what? Prices have gone up and up and up since 2019. Not only that, they’ve gone up since 2011.
For the first time in history, prices have gone up over ten years in a row. And they may keep going up, who knows? So let us analyze that scenario as we approach the spring market. In fact, it’s spring tomorrow, 2023. This is a busy time for real estate and some experts are forecasting an appreciation and some experts are forecasting a depreciation in the housing market. So there are mixed signals. But here’s a quote I’m going to read out to you from Core Logic, “While 2023 kicked off on a more optimistic note for the US housing market, recent mortgage rate volatility highlights how much uncertainty remains. Nevertheless, the continued shortage of for-sale homes is likely to keep prices decline modest, which are projected to top out at 3% peak to trough.” Additionally, pulse nomics interviews and asks questions to over 100 economists, strategists, and housing analysts on what is the forecast for the next five years coming in.
I have a chart that indicates an appreciation in prices. In 2023 there’s a drop of approximately 1.61% in 2024, 2025, 2026, and 2027. They show appreciation in home prices. So maybe the shortage in homes have a big thing to do with the appreciation in prices. And as you are aware, just a few days back, Silicon Valley Bank, one of the largest banks in the U.S., closed and shut their doors. That was a big impact on the housing economy, at least it might be. There’s a few other banks like First Republic Bank in trouble right now. And the federal government has pumped in over $30 billion to First Republic Bank. In fact, banks like Credit Suisse and a lot of other national banks and international banks are in trouble. So let’s see what impact that will have on the housing in not only this year, in 2023 but in 2024 and beyond. We’ll wait and see. But for now, these are the predictions from the hundreds or so analysts that we looked at.
So given this information from these economists and experts, the big question still is should I buy or should I wait? Yes, the prices have gone up for the last ten to twelve years. They may go up for the next three or four years. Yes, interest rates are higher from 3%. They’re now at six and a half percent. They used to be 12%, and the average national interest rate is about 6%. If you take an average of 40 years, that average is 6% of interest rate. So we’re not that bad of an interest rate. But here are three things you have to look at why buying a house now is a good thing, despite the housing factors and housing things going on around us. Number one, buying a house escapes you from the rising rental prices. As you know, as the housing prices go up, rental prices go up also. In fact, at least in Orange County, over the last four or five years, rents have gone upon average from three to 5% per year. That’s a very high increase in rent, considering it’s trying to keep up with the housing prices.
The second reason why you may want to buy a house now is that buying a house is an edge toward the housing inflation. If you buy a house and you get a fixed mortgage rate for 30 years, your house payments are fixed for 30 years, no matter what happens to the economy, or what happens to the housing prices, or what happens with the interest rate. So it’s a great hedge against inflation, buying a house. The third reason you may want to buy a house now and start buying now is that your house prices go up every year. So when you buy a house this year, on average, your house price is going to start to rise 4%per year every year for the next 30 years. Of course, that’s the statistics which shows that house appreciates 4% per year over the 10-30 years. So if you’re buying long-term, buying a house is a good thing. Plus, your net worth will be 40 times more than if you will keep renting. On average, the net worth of a homeowner is 40 times more than a renter. So do you want to be a renter or do you want to be a homeowner and increase your net worth by 40 times?
Buying a house is a great wealth-building tool. As I mentioned earlier, home prices appreciate every year. Statistics show that home prices, depending on when you bought and at what prices you bought, home prices double or triple in value in the next 20 to 30 years. How can you make those kinds of savings by working eight to five or by owning a home? So just by the appreciation of your home, you’re building your wealth. The other advantage is that when you buy a house, you get tax deductions. Not only do you get deductions on your closing cost and your property taxes, but you also get deductions on your interest rate. Talk to your accountant to see the tax benefits of owning a home. So it’s a great way to build your wealth just by doing nothing.
And the fourth reason you want to buy a house or how it builds wealth is that every time you make a mortgage payment versus a rental payment, you are building equity. Because, let’s say if your payment is $2,500 a month, usually the first few years out of the$2,500, almost $2,200 is going towards the interest. But as you go, as your time goes up every month, the $300 to $400 a month goes towards your principal. This way you’re building equity. By the 10th or 12th year, you’re paying a lot more equity from your principal and interest payment than your interest alone. And towards the end of your payment, most of your payments are going towards your principal. I’ve been in my house for over 25 years and I’ve got five more years to go.
My payment is about $2,600, and almost $2,200 of that amount is going toward the principal right now. So I’m building $2,200 in equity every month that I pay. So I’m excited about it. And yes, my house has more than doubled ever since I bought. So it seems like the predictions may not be what you want it to be on your homes, whether it’s going to drop or not.
But if you are thinking about buying, if you’re concerned about buying, if you’re not sure what’s a good time to buy, reach out to me. I’ll be glad to answer any of your questions or give you any steps or resources, or if you want a local agent in your neighborhood. I belong to the top 1% or 3% of all the agents in the USA and I can refer you to a great agent to talk to or to help you find a house.