Home prices grew 6.2% in July year-over-year
It’s not new information that we are currently in a Seller’s market and it has been this way for quite some time. What is new information, is that as home prices continue to grow, sellers in particular markets are holding onto their properties so they can get the absolute most out of their investments. Frank Martell, CEO of CoreLogic, explains, “Our consumer research indicates homeowners, especially those in high-price growth markets, are confident that by waiting to sell, they will receive a greater return on investments than they would today.” The average single-family home is $285,700 and there are certain markets in particular where home prices are growing at an astonishing rate. For example, states like Nevada, Washington, and Idaho have seen growth in home prices by more than 10 % in the past year. With numbers like this, homeowners have more confidence than ever and are holding off on selling, in order to potentially get the biggest return on their properties. CoreLogic’s analysis of homeowner’s attitudes says that 62% of residents in high growth markets believe their house will be worth more within the next 3 years, as opposed to 55% of residents in markets with either no growth or negative growth.
Inventory Shortages Contributing to Growth
Another factor, causing this exaggerated spike in home prices is the inventory shortages that currently exist in the industry. With fewer homes on the market, it makes the ones currently on there to continue to rise in price. There is low supply and high demand; the perfect combination to create inflated home prices.
How Long Will This Last?
There are however some markets that are not seeing the same growth this year as they were last year. A large reason for this is because many of these markets have been completely overvalued. Take for example, Seattle whose home value growth dropped more than 5 %. Predictions show there will be a growth of 5.1 % by next July, but another 0.2% drop come next August. Many metropolitan areas experienced rapid growth in home price and these places have to eventually slow down, right? Chief Economist at Corelogic, Dr. Frank Nothaft, says, “with increased interest rates and home prices, the CoreLogic Home Price Index is rising at a slower rate than it was earlier this year. While markets in the western part of the country continue to experience rapid home-price growth, many of those metros are overvalued, and will likely experience a slowdown soon.” It’s a balancing act that requires perfect timing in order to get the biggest possible return, but the bubble has to eventually burst, doesn’t it? Do you think this trend will continue or are we going to see a decline in home prices in the near future?