Expert Consensus Home Values Projected to Keep Rising
Home Values Projected to Keep Rising
As we enter the final months of 2020 and continue to work through the challenges this year has brought, some of us wonder what impact continued economic uncertainty could have on home prices. Looking at the big picture, the rules of supply and demand will give us the clearest idea of what is to come in our near future.
Due to the undersupply of homes on the market combined with historically low mortgage rates in the Greater Hartford area, there will continue to be upward pressure on prices moving forward. Consider simple economics: when there is high demand for an item and a low supply of it, and consumers are able to finance their purchase with lower funding costs. They are willing and able to pay more for that item. That is what’s happening in today’s real estate market in the Greater Hartford area. The housing supply shortage combined with low mortgage rates is resulting in bidding wars, which will also drive price points higher in the home sale process.
There’s no evidence that buyer demand will wane. As a result, experts project price appreciation will continue over the next twelve months. Here’s a graph of the major forecasts released in the last 60 days:
I hear many foreclosures might be coming to the market soon. Won’t that drive prices down?
Some are concerned that homeowners who entered a mortgage forbearance plan might face foreclosure once their plan ends. However, when you analyze the data on those in forbearance, it’s clear the actual level of risk is quite low.
Ivy Zelman, CEO of Zelman & Associates and a highly-regarded expert in housing and housing-related industries, was very firm in a podcast last week:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
With demand high, supply low, and little risk of a foreclosure crisis, home prices will continue to appreciate.
Originally, many thought home prices would depreciate in 2020 due to the economic slowdown from the coronavirus. Instead, prices appreciated substantially because of tight housing supply and low mortgage rates. Over the next year, as long as, the local unemployment rate continues to remain low. West Hartford unemployment rate is now running at 5.8% vs 7.9% nationwide. We will likely see home values rise even higher into the new year given the continued lack of inventory of homes for sale.