Home Appreciation is Slowing… That’s the Good News!

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Filed under: Market Comentary

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A report came out yesterday: the FHFA Housing Price Index. The update was all over the media outlets, with lots of people talking about a possible housing crash. This report shows that housing appreciation is slowing down across the nation.

My opinion is that this slowing is good news! If you remember a few weeks ago, I showed a chart with a flat 4% per year growth line compared to the reality of the real estate market over 20 years. That 4% growth line is a fantastic rate to maintain – especially when you pair it with amortization; it works out to be a great investment.

Since I shared this graph, appreciation has continued to grow and increase in a steep way. If it keeps going like that, then we’ll see a correction at some point. So, I’m glad to see that appreciation is starting to flatten out.

Let’s Put This in Perspective

Appreciation was down year-over-year nationally, but the numbers still show 1% month over month and 18% year over year across the United States. In the west, the numbers are even higher: it was 1.1% monthly appreciation (down from about 1.7%) and we are still at 21% year-over-year.

As you can see, these numbers are still really aggressive. So, there isn’t anything to worry about in the overall investment. Even if we see it turn down, I would still feel good about where things are in the real estate market. From my perspective, we want to stay in this steady line with a 4 – 5% annualized increase in appreciation– and it will never be perfectly linear.

Sensationalism in the News

It’s interesting to see how different news outlets talk about different headline topics. Remember: the news outlets get paid to be sensational! Who knows, maybe the sky is falling?! But for now, I think we’re in a good place. As appreciation is slowing down, the hope is that we will get back to a more normal level.

I’m always here to answer your questions about the real estate industry, home financing, and more. Reach out to me if you are thinking about buying a new home or you want to refinance your current property.

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