Real Estate Macro Trends... What does that even mean?
As we come out of our semi-annual Keller Williams conference, we always like to highlight some macro real estate trends that the company is tracking so that we can share this value with you. What we found very interesting is that, despite home sales being pretty consistent nationally in terms of the volume of sales in the last six years, the prices have gone up precipitously in the last two years. Traditionally, home prices go up about 4% per year and what we saw is about a 13% appreciation from 2019-2020 and 15% projected appreciation for 2021 compared to 2020. Therefore, over the last 24 months, the median home price has outpaced the historical averages by 3 to 4 times. Home values have gone up a whopping 28% in just two calendar years. This is pretty astronomical and what our clients are experiencing in the marketplace.
So what do we make of this trend? While we are not in the prediction business, it seems hard to imagine that the prices are going to continue to go up this precipitously next year. The main driver of the price increase is that the supply of homes has remained consistent over the last six years and we have never quite got back to the annual home sales of 2004 and 2005. Back then, over 7 million homes were being sold annually. We have not cracked 6 million home sales annually since then.
It really feels like the market could absorb more homes if the supply was there. Until then, buyers and renters alike will continue to feel the price pressure of this lack of supply.
We have included these two helpful slides for your reference and we hope you find them useful in understanding this blog. We also hope and trust that you and yours will remain safe and healthy this fall as unfortunately we are seeing another spike in Covid cases. We are not sure how that will affect the market moving forward, but observers are closely monitoring interest rates, foreclosures, and evictions as these all affect the overall market.
Finally, the one other really interesting thing is that this year we got back to more traditional seasonality in the market. Meaning, in the last two quarters of 2020, we saw more home sales than the first two quarters of 2020 due to Covid. This year that seasonality is much more in balance and in alignment with traditional real estate cycles.
As always, “how’s the market doing?” is one of our most common questions. And as always, the answer depends on what you are trying to accomplish. So don’t hesitate to reach out to us with any and all questions as we are always here for you as the real estate economist of choice. Wishing you all well and hope to see you at one of our upcoming events!