These days, headlines urging a housing market meltdown are common. In actuality, though, they are not providing the whole picture. Here are the current state of affairs and the predictions made by experts regarding home prices over the next five years. And it’s not a crash, spoiler alert.
Indeed, as more homes hit the market this year, prices are leveling off or even slightly declining in some local markets. With increasing inventory, that is typical. However, the larger picture—which is far less dramatic than the gloomy headlines imply—is what matters most. Here’s why.
The most recent Fannie Mae Home Price Expectations Survey (HPES) polled more than 100 top housing market experts. According to their combined prediction, prices will continue to rise over the next five years, albeit more slowly and healthily than in recent years. And one thing that should allay your concerns about the years to come is that kind of consistent, sustainable growth (see graph below):
And if you look at how the different experts answered the survey, you can see that they can be divided into three groups: those who were most pessimistic, those who were most optimistic, and those who had an average outlook overall.
The breakdown looks like this:
- Through 2029, the average forecast is for annual price growth of roughly 3.3%.
- Growth, according to the optimists, is closer to 5.0% annually.
- The pessimists continue to predict annual growth of roughly 1.3%.
Are they all in agreement on the same figure?
Obviously not. The main conclusion, however, is that no expert group is advocating for a significant national downturn or crash. Rather, they anticipate that home values will increase at a more consistent and sustainable rate.
Both you and the market will benefit greatly from that. Indeed, in certain regions, particularly those with increasing inventory, prices may hold steady or even slightly decline in the near future. Because there are still fewer homes for sale than there are buyers attempting to buy them, some may appreciate more quickly than the national average. However, generally speaking, slower price growth is reducing the sharp spikes that occurred during the previous few years’ frenzy.
And keep in mind that even the most pessimistic analysts predict price increases over the next five years. This is also due to low foreclosure rates, strict lending guidelines, and nearly record-high homeowner equity, all of which contribute to the market’s stability. When combined, those elements aid in avoiding a surge of forced sales, such as those that might drive down prices. Therefore, you may have to wait a long time if you’re waiting for a big crash before making a purchase.
Bottom Line
Now is the perfect moment to clarify your plans if you’ve been unsure. With a few regional ups and downs along the way, the market is on course for long-term, steady growth rather than a crash.