What’s Causing Ongoing Home Price Appreciation? Andrew Shader Explains
Before you make a big move, it’s important to get a gauge on current home prices, how they’ve shifted in the recent past, and how they’re expected to shift in the future. Real estate expert Andrew Shader gives some crucial insight into the current rate of appreciation in the housing market and what could be causing this trend.
According to many experts in the field, the market is continuing to shift after several years of ups and downs, especially due to the pandemic. Though prices will likely continue to moderate in the coming months, there are some key reasons why price growth is forecasted to continue even after natural moderations in prices have finished.
Housing Supply Is Still Suppressed Despite Promising Growth
Over the past few years, the market has been favoring the seller due to low supply and high demand for housing. Though small fluctuations have occurred, this has remained true and continues to be true despite the fact that inventory is steadily increasing at an incremental rate.
The 2008 housing market crash occurred for multiple reasons, but one of the most significant was the massive increase in homebuilding in the years leading up to it due to the loosening of lending standards and an increase in potential buyers qualifying for home loans.
The crash resulted in an excess of homes available and subsequently a massive slowdown in new home construction, which has now resulted in the several-year seller’s market that we are currently approaching the end of.
Since the housing supply is still low today, home prices continue to appreciate. However, new homes are being built at an increasing rate and will eventually rise to meet the deficit that was caused by underbuilding since 2008.
Millennials Are Expected to Sustain Buyer Demand from Now On
Home prices were driven up significantly during the pandemic because the demand for homes massively outweighed the supply of properties available. As we get farther away from 2020, the demand has started to moderate itself, largely in response to increases in mortgage rates.
However, those who were born in the millennial generation (i.e., roughly between the years of 1981 and 1996) are starting to reach optimal homebuying ages, according to data from previous generations.
This data, as well as increased demand from millennial-aged buyers despite increasing mortgage rates and relatively low supply, simply goes to show that this generation will be the primary group sustaining buyer demand into the near future.
The high demand for homes from millennial buyers despite deterring factors is a primary reason why the appreciation of home prices is set to continue.
What Does This Mean for Home Prices?
Thanks to the continued low supply of homes and the steady demand from millennial home buyers, potential sellers won’t have to worry about home prices dropping significantly anytime soon. However, appreciation is expected to become more moderate.
About Andrew Shader
Andrew Shader is a former insurance entrepreneur turned real estate investor and developer based in Fort Lauderdale. His strategy is focused on finding ways to add value to properties to attain the most optimal outcome for his clients.
