Home Value Appreciation Expected to Exceed 6% in 2013

Home values at 2013 year-end are expected to be up 6.7% from the end of 2012, according to Zillow blog and their survey panel of 106 real estate and economic experts.

As the housing market continues to appreciate,  the panel believes that rising mortgage interest rates wont pose too much of a threat if the acceleration rate stays between the 4-5% range.  If it does reach 6% or higher like expected, however, it could start to cause problems for homeowners.

Median U.S. home values are expected to rise to $167,490 by the end of 2013, up from $156,900 at the end of 2012 and $161,100 currently.  The current 5-year expectations for home value appreciation anticipates record highs by the end of 2017, nearing the $194,600 high of May 2007.

Values for the city of Chicago have followed a similar trend, but perhaps more dramatically.  Home prices are up about 20% year over year from July 2012 to July 2013, but of course this varies greatly by neighborhood.  Home price gains have already leveled off in the most recent 6-8 weeks, but still have the Autumn market to finish the year strong.

Median Home Prices for City of Chicago - July 2012 - July 2013 (Source: MRED LLC.)

This year's appreciation rates are expected to end on a strong note before slowing down from 2014 through 2017.  In 2014, the panelists anticipate rates to slow to 4.4%, and then slow further to 3.6%, 3.5%, and 3.4% in 2015, 2016, and 2017, respectively.

Senior Economist at Zillow, Dr. Svenja Gudell, explains these findings.

"Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand and low inventory. Combined, these factors will continue putting upward pressure on home values for the next few months.  But the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise and more inventory becomes available. Over the next few years, these trends will help the market stabilize and will bring home value appreciation more in line with historic norms. As long as mortgage interest rates don’t rise too far and too fast, most markets should be able to absorb these changing dynamics while still remaining healthy."

Will these increases in mortgage rates present a threat to the housing market recovery?  88% of panelists said no.  We can anticipate complications, however, which solidifies our philosophy on the current market: buying now can save you in the long run.

Have questions?  Unsure where to start your own process, or what these findings mean for you?  Send me a message or give me a call and we can work out a strategy that will work best for you in this market.