As we entered 2023, apprehensions loomed about a potential recession that could destabilize the housing market, with some media outlets predicting a significant 10-20% drop in home prices. Such forecasts might have instilled a sense of uncertainty for prospective homebuyers.
However, reality defied these projections, as home prices experienced a notable surge. Brian D. Luke, Head of Commodities at S&P Dow Jones Indices, sheds light on this:
"In retrospect, 2023 appears to have surpassed the average annual home price gains observed over the past 35 years."
To contextualize last year's growth, consider the graph below, utilizing data from Freddie Mac depicting yearly changes in home prices since 1980, with the dotted line indicating the long-term average for appreciation.
The significant takeaway? Home prices demonstrate a consistent upward trajectory. Forbes echoes this sentiment, highlighting the enduring trend in the U.S. real estate market:
". . . the U.S. real estate market has a long and reliable history of increasing in value over time."
Remarkably, since 1980, instances of home prices decreasing were rare, confined primarily to the housing market crash depicted in red in the graph above. Fortunately, the present market scenario starkly differs from the tumultuous period of 2008. Notably, there is presently a scarcity of available homes to meet the surging demand from buyers. Moreover, homeowners are fortified with substantial equity, placing them on much firmer ground than during the preceding crisis. Consequently, there is no looming threat of a foreclosure wave precipitating price declines.
The consistent appreciation in home values, barring the isolated downturns, underscores why homeownership can be regarded as one of the savviest financial maneuvers. By owning a home, individuals possess an asset that typically accrues value over time. As the value of your home appreciates, so does your net worth.
Thus, for those who are financially secure and equipped to navigate the responsibilities and expenses associated with homeownership, purchasing a home emerges as a prudent decision.
In essence, the upward trajectory of home prices over time underscores the wisdom of investing in homeownership, provided one is prepared and capable. To explore further, consider consulting a local real estate agent to align your objectives with available opportunities in your area.