This is probably the question most home buyers are concerned about today, especially if they’ve been involved in bidding wars on a home and question if they’re “overpaying”. In the bay area of northern California, it actually feels like not only are prices not showing any trend of going down, but that they’re accelerating, and continue to provide “shock and awe” at how significant prices are going up. Even with lender forbearance ending and the local economy expected to “open up” next month, economists still predict housing prices will continue to go up in 2021.
Here’s what has changed, at the beginning of 2021, industry forecasters said home price appreciation will slow to about half of the double-digit increase we saw last year. Their thinking was that more homes would come on the market, and that increased inventory would put an end to the bidding wars that have driven home prices up over the past twelve months. However, that increase in inventory has yet to materialize. The National Association of Realtors (NAR) reports that there are currently 410,000 fewer single-family homes available for sale than there were at this time last year.
This has forced those who made appreciation forecasts this past January to amend those projections. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, the National Association of Realtors, and Zelman & Associates have all adjusted their numbers upward after reviewing first quarter housing data. Here are their original forecasts and their newly updated projections:Even with the increases, the updated projections still don’t reach the above 10% appreciation levels of 2020. However, a jump in the average projection from 5.3% to 7.7% after just one quarter is substantial. Demand is expected to remain strong, so future appreciation will be determined by how quickly listing inventory makes its way to the market.
Entering 2021, there was some speculation that we might see price appreciation slow dramatically this year. Even though we didn’t see it day to day, the forecasts were worrying buyers. Today, experts believe that won’t be the case and home values will continue to increase throughout the year, making it a very attractive investment option!