Mar 5 2018 14025 1

Dated: 03/05/2018

Views: 67

 

Are Home Values Really Overinflated?

Are Home Values Really Overinflated? | MyKCM

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.

Are Home Values Really Overinflated? | MyKCM

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.

Are Home Values Really Overinflated? | MyKCM

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.

Bottom Line

Based on historic appreciation levels, we should be very comfortable that current home values are not overinflated.


Blog author image

Richard Hewitt

As a life long resident of St. Clair County, only having moved away long enough to serve honorably in the U.S. Navy, I have the local knowledge to help guide my clients to a great outcome. I bring a t....

Latest Blog Posts

ST CLAIR COUNTY REAL ESTATE LISTS

Check out "HOW IT WORKS"  Play Video Below!!St Clair County Real Estate         Quick Links Page       Hello, I am Don Egypt "Your Realty

Read More

NAR Reports Show It's A Great Time To Sell!

NAR Reports Show It’s A Great Time to Sell!We all realize that the best time to sell anything is when the demand for that item is high and the supply of that item is limited. The last two

Read More

Price Reductions; what do they mean?

What Does the Recent Rash of Price Reductions Mean to the Real Estate Market?Last week, in a new report from Zillow, it was revealed that there has been a rash of price reductions

Read More

Jul 20 2018 14025 1

 What You Need to Know About the Mortgage Process [INFOGRAPHIC]Some Highlights: Many buyers are purchasing a home with a down payment as little as 3%. You may already qualify for a

Read More