Are home values really overinflated?
Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:
“The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.”
Seventy-one consecutive months of price increases may have some concerned that current home values may be overinflated.
However, at the same time, Zillow issued a press release which revealed:
“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”
Here are two graphs that help show why home prices are exactly where they should be.
The first graph shows actual median home sales prices from 2000 through 2017.
By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a rollercoaster ride that is about to take another turn downward.
However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.
The blue bars on this graph represent where prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.
Based on historic appreciation levels, we should be very comfortable that current home values are not overinflated.
If you have any questions or need help with anything, please don’t hesitate to reach out. I’m happy to help!
Psst, I’m a real estate agent.
This post was authored by local resident and REALTOR, John Womeldorf. John is known around town as Mr. Williamsburg, for both his extensive knowledge of the Richmond, Williamsburg/ Hampton Roads area and his expertise helping buyers and sellers in the local real estate market.
If you are a homeowner searching for someone innovative to sell your home I would love to share my thoughts on marketing. You can read some of the stories I have written about the homes I have sold here.
Additionally, I have helped hundreds of folks find their dream home/ community and would love to help you find yours in Williamsburg, Yorktown, New Kent, VA Beach, Chesapeake, Suffolk, Isle of Wight Poquoson as well as Richmond.
You can reach me by phone at 757-254-8136 or email John@MrWilliamsburg.com
I look forward to serving your real estate needs!