Home value growth reached peak in April
One of the biggest things that has consistently driven down affordability over the last several years is the fact that home values have been growing – often by leaps and bounds – fairly steadily during that time. However, it now seems as though this trend is no longer prevalent in the market overall.
Overall home value growth climbed to 8.1 percent on an annual basis in April, but has been falling somewhat precipitously ever since, according to the latest data from the housing market tracking firm Zillow. Through the end of the third quarter, that number came to just 6.5 percent on an annual basis, and is now projected to fall to as little as 3 percent by the same time next year. As recently as a few years ago, homes in some markets were increasing by 20 percent or more on an annual basis, and over a sustained period of time.
"We always knew these market conditions couldn't last, and it's good to see us now on a more natural and sustained glide path down toward more normal market conditions of roughly 3 percent annual appreciation and more balance between buyers and sellers," said Zillow chief economist Dr. Stan Humphries. "Home values should continue to grow, but that growth will increasingly be driven by traditional market fundamentals like household formation and job growth, and less by artificial stimulants like decreased supply and widespread investor demand."
How much is supply and demand changing?
The biggest reason for the slowdown in home value appreciation is the fact that improving prices are bringing more buyers into the market, and this is highlighted by the fact that the end of the third quarter this year saw 18.6 percent more homes up for sale than at the same time a year earlier, the report said. Further, 37 percent of homes listed as being for sale on the site had at least one price cut in the previous month, and that number was up from 33.6 percent in September 2013.
This kind of slowdown might actually be very good news for would-be buyers in the coming months and beyond, because they might find themselves in a far better position to actually be able to afford a mortgage. Without these changes, the issue might have otherwise been more pressing, especially because rates are projected to go up significantly within the next several months.
By: Equity National October 24, 2014 Closing