April 19 2022

What Do Experts Mean by “Appreciation will Normalize?”

What Do Experts Mean by “Appreciation will Normalize?” Last year home prices saw a huge increase that was much larger than many years prior. According to the S and P CoreLogic Case-Schiller Home Price Index, home prices saw an incredible increase of 19% in 2021. But many real estate experts have been saying lately that they expect home price appreciation to normalize.

What does this mean? What Do Experts Mean by “Appreciation will Normalize?”

Some real estate experts are predicting that home prices could reach double-digit growth again. Zillow shared a report in January 2022 that stated home values were expected to grow around 16.4% between December of last year and December of this year. Another financial entity Goldman Sachs said they predicted that home prices would rise 16% over the year 2022. The federal mortgage entity Fannie May says they expect home prices to climb 11.2% through the year and continue to increase in 2023 at a more modest pace.

But there are some other large real estate companies that have a more conservative outlook on real estate market predictions. The National Association of Realtors for example is saying that they expect a price climb of just 5.7% through the end of this year. The online real estate giant realtor.com says they predict a growth of 2.9%. Redfin has predicted that the annual rate of increase will be about 7%.

One thing is for certain over the last few years the real estate market has been a little surprising since the beginning of the pandemic. It is no surprise that predictions seem to be all over the place for the year 2022. But some experts say that everyone is predicting growth whether it’s large or small and that this growth will continue into the near future as mortgage rates continue to stay historically low.

Mortgage rates play a big role in-home price estimates as they help to fuel buyer demand and the possibility of bidding wars which then drives home prices up. Most people are looking to the actions that the federal reserve will take in the middle of this month. Though they do not directly control and set mortgage rates they do set an overall tone for interest rates and rates are expected to increase very shortly.

It is said that an increase in mortgage rates and activity in the economy will have an impact on the value of real estate in the future. So as mortgage rates are expected to increase this is expected to help cool off the rate of home price inflation as the year carries on. Even though home prices are expected to rise more and more real estate experts are expecting them to rise at a lesser rate and eventually see the market balance out.

Some experts are predicting that double-digit growth will continue. We are seeing more and more of the school of thought that it will be a lesser appreciation than originally forecasted at the end of last year from those companies.

For more information on real estate in Snohomish County both residential and commercial please contact us any time.

What Do Experts Mean by “Appreciation will Normalize?”