I know just about as much as the next guy about most things–unless that thing is car repairs. I don’t do car repairs; I have people. And when the repairs get too burdensome, I’ll buy a new car. But I digress. I was saying that my understanding of most things is on par with about everyone else you know. But when pressed to understand concepts in more detail, I’m not afraid to do a lot of research and run as many computations as necessary until I understand what’s going on.
Historically speaking, since January 1963, home prices have increased an average of 4.55% each and every year, for the last 60 years. We buy homes because they appreciate a double the rate of inflation. The graph above is the Case Shiller index since the dawn of the millennium. In April 2000, the average home in the U.S. was $103,996. Today, it’s $303,091. The imputed 4.55% appreciation rate over the last 23 years would have the median home value at $295,570 in two months. That’s the flat black line on the graph. The green line is a 4.0% average, just for fun. Both are below the current line. BUT, I don’t see prices declining further right now. Rather, I see them staying relatively flat through the end of the year and here’s the math.
The median $295K home will average an appreciation rate of $1,120 per month this year. Obviously, we haven’t seen a home less than $300K for a few years now, so our clients’ homes are realizing greater value increases than that. But back to the graph: At 4.55% appreciation rate, the median home price will be $304,535 in December 2023. That’s about $1,000 higher than it is right now, and about $10,000 lower than the previous high realized in June 2022. Watch for home prices to hit new all-time-highs again in summer of 2024. So the time to buy is NOW before prices go up.