If you’re thinking about making a move, you probably want to know what’s going to happen to home prices for the
rest of the year. While experts say price growth will moderate due to the shifting market, ongoing appreciation is
expected. That means home prices won’t fall. Here’s a look at two key reasons experts forecast continued price
growth: supply and demand.
While Growing, Housing Supply Is Still Low
Even though inventory is increasing this year as the market moderates, supply is still low. The graph below helps
tell the story of why there still aren’t enough homes on the market today. It uses data from the Census to show the
number of single-family homes that were built in this country going all the way back to the 1970s.
The blue bars represent the years leading up to the housing crisis in 2008. As the graph shows, right before the
crash, homebuilding increased significantly. That’s because buyer demand was so high due to
loose lending standards that enabled more people to qualify for a home loan.
The resulting oversupply of homes for sale led to prices dropping during the crash and some builders leaving the
industry or closing their businesses – and that led to a long period of underbuilding of new homes. And even as
more new homes are constructed this year and in the years ahead, this isn’t something that can be resolved
overnight. It’ll take time to build enough homes to meet the deficit of underbuilding that took place over the past
Millennials Will Create Sustained Buyer Demand Moving Forward
The frenzy the market saw during the pandemic is because there was more demand than homes for sale. That
drove home prices up as buyers competed with one another for available homes. And while buyer demand has
moderated today in response to higher mortgage rates, data tells us demand will continue to be driven by the
large generation of millennials aging into their peak homebuying years (see graph below):
Odeta Kushi, Deputy Chief Economist at First American, explains: “. . . millennials continue to transition to their
prime home-buying age and will remain the driving force in potential homeownership demand in the years ahead.”
That combination of millennial demand and low housing supply continues to put upward pressure on home prices.
As Bankrate says: “After all, supplies of homes for sale remain near record lows. And while a jump in mortgage
rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new
construction and strong household formation by large numbers of millennials.”
What This Means for Home Prices
If you’re worried home values will fall, rest assured that experts forecast ongoing home price appreciation thanks
to the lingering imbalance of supply and demand. That means home prices won’t decline.
Based on today’s factors driving supply and demand, experts project home price appreciation will continue. It’ll
just happen at a more moderate pace as the housing market continues its shift back toward pre-pandemic levels.
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