Are Home Prices Dropping

Are Home Prices Dropping?

Homes are still appreciating at solid rates. The average annual home appreciation rate since 1991 is 4.4%. Hot seller’s markets have gotten used to 20% annual appreciation or more in recent years. Homeowners have reaped the benefits. However, appreciation rates that high are not economically sustainable.

Average US and Franklin, Tennessee Current Home Sale Price

Sale prices are cooling down in most markets to recover from such high appreciation rates. This is hoped to help reduce the inflation rate. A slowing of sale prices will help the housing market. It has become difficult for buyers, especially first time buyers to qualify for a home.

If appreciation rates remained at the historically high rates the housing market would crash. Appreciation rates over the average 4.4% are not sustainable.

Here’s an example. Let’s say homes in a given area are appreciating at a rate of 20% a year. Home buyers would need to achieve an income increase of 20% in order to have the ability to buy said home. Employee pay raises are not typically anywhere near 20% a year. The local buyers are priced out of buying a home as a result. This leaves buyers that are leveraging equity or moving in from out of state areas that have appreciated at higher rates. Even those buyers would be priced out of the housing market at some point.

If you’d like to know are home sale prices dropping in your neighborhood – give us a call or schedule and appointment. Whether you’re thinking of moving now or in a year we’re here to help!