By Chad Taylor
Question: Are we seeing appreciation of home values yet?
Well, it is now April and we are in the heart of the spring real estate market. Flowers are blooming, snow is melting away (finally), and, yes, appreciation is on the horizon for many of us. That is not a casual statement. I, like many homeowners, don’t take appreciation for granted. Especially after the last six years.
Let’s talk about the evidence that tells me appreciation is headed our way.
First, home prices have stabilized. In many areas of town, the average median sales price has actually increased compared to this same time last year. This stabilization of home prices is the foundation for a true “housing recovery” and consistent annual appreciation. Stable values coupled with low housing inventory is a very simple equation for appreciation. As supply stays low or even decreases, demand will intensify.
The second evidentiary point is the stabilization of the mortgage industry. For a while there, the banks were telling a different story almost daily. Buyers went from being “bona fide” one day to no longer able to obtain financing the next. Additionally, appraisal requirements kept getting tougher and tougher. The investors behind the loans wanted to make darn sure that if the buyer was to default, the investor could make his money back. Though understandable, it felt for a while like the lending industry was holding back the recovery. Of course, there were a lot of contributing factors and we all played a part.
The good news is that lenders ARE lending and although the process is more detailed now because of new guidelines and restrictions, the money is flowing. On top of that, rates are still at record lows. It appears that the mortgage industry and its investors are now comfortable with the “new normal” and it is “game on” for them.
The third step to housing recovery is actually the unemployment rate (now down to 7.7 percent). As job security returns and job opportunity increases, buyer confidence increases. It makes sense that when buyers are gainfully employed and have no fear of losing their job, they are more comfortable purchasing. They are also more comfortable with the thought of paying a higher price for a home in an incling market, thus supporting the notion of appreciation.
I referred to the new normal earlier. The new normal, as predicted by most real estate news sources, will not have the rapid trajectory of appreciation that we saw in the late 1990s and early 2000s. Our market has been corrected in a sense and should now consist of steady appreciation that will keep more in line with the cost of living. This will allow more buyers to buy in the absence of skyrocketing home values. What is the old saying? “Anything in excess is not good for you.” The same applies to home values. The new normal is good for us all.
This weekly sponsored column is written by Chad Taylor of the Taylor-Made Team and Keller Williams Realty Key Partners, LLC. The Taylor-Made Team consistently performs in the top 3 percent of Realtors in the Heartland MLS. Please submit follow-up questions in the comments section or via email. You can find out more about the Taylor-Made Team on its website. And always feel free to call at 913-825-7540.