At the beginning of the year, industry forecasts called for home price appreciation to slow to about half of the double-digit increase we saw last year. The thinking was that inventory would increase from record-low levels and put an end to the bidding wars that have driven home prices up over the past twelve months. However, that increase in inventory has yet to materialize. The National Association of Realtors (NAR) reports that there are currently 410,000 fewer single-family homes available for sale than there were at this time last year.
This has forced those who made appreciation forecasts this past January to amend those projections. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, the National Association of Realtors, and Zelman & Associates have all adjusted their numbers upward after reviewing first quarter housing data. Here are their original forecasts and their newly updated projections:
Even with the increases, the updated projections still don’t reach the above 10% appreciation levels of 2020. However, a jump in the average projection from 5.3% to 7.7% after just one quarter is substantial. Demand will remain strong, so future appreciation will be determined by how quickly listing inventory makes its way to the market.
We talked to a Denver-based real estate investor about what is happening in the Colorado housing market. "Denver cooled off about 198 months ago, down from double-digit appreciation, and at the time I believed that was the end of 10% plus an appreciation for a while however this was not the case because over the last 12 months Denver has appreciated almost 15%. This is great for owners that are holding property but those sitting on the sidelines are feeling the heat. A lot of potential buyers are hoping that the loan forbearance may create a market downturn however I am not so sure about that as unemployment rates are coming down again so people are once again paying the mortgages. I have an investment property business, based in Denver, and I have seen a drop off in the number of people asking how to sell my house fast for cash throughout this rapid appreciation and I believe this is because money is so cheap to borrow and banks are willing to modify loans as the value of the house appreciates and while this is good right now there is some fear that it is kicking the can down the road but only time will tell. In the meantime, my advice to people is to make sure you have some money saved up for a rainy day, in case emergency repairs or renovations are required or you are out of work for a period."
Bottom Line
Entering 2021, there was some speculation that we might see price appreciation slow dramatically this year. Today, experts believe that won’t be the case. Home values will remain strong throughout the year.