Experts are starting to make their 2023 home price forecasts. As they do, most agree homes will continue to gain value, just at a slower pace. Over the past couple of years, home prices have risen at an unsustainable rate, leaving many to wonder how long it would last. If you’re asking yourself: what’s ahead for the price of my home, know that experts are now answering this question, and its welcome news for homeowners who may have been led by the media to believe their home would lose value.
Historically, home prices have appreciated at a rate near 4% on the national level. In Summit County Colorado, our properties have appreciated over 7% per year over time.
While we do not have an expert opinion for Summit County’s home price forecasts, we do know that the average of six major forecasters are anticipating an average of 2.5% nationally. While one, Zelman & Associates, is calling for depreciation, the other five are calling for appreciation. The graph below outlines each expert forecast to show where they project home prices are going in the coming year.
To understand why experts are calling for appreciation next year, look to the economics of supply and demand. Dave Ramsey, Financial Expert, says this:
“The root issue of what drives house prices almost always is supply and demand . . .”
Two things are driving home prices upward. First, the undersupply of homes on the market is an issue we continue to face in this country. We still don’t have enough homes on the market for the number of people that want to buy them. To further that point, we’re still in a sellers’ market nationally, and in that scenario, home prices tend to appreciate.
Second, millennials are moving through their peak homebuying years. Since they’re the largest demographic behind the baby boomers, demand isn’t going away any time soon.
Typically, Summit County property values have appreciated higher than national rate. As we move into 2023, these are the factors that will affect Summit County’s values:
- Short-term rental regulations. As we are currently seeing in unincorporated areas of Summit County, lower end properties such as condos under the $1M price point are beginning to see a flattening and in some cases a lowering of values. Until the County and Towns finalize the new regulations, we anticipate that the demand for these properties will remain low, as many buyers want to know they will be able to short-term rent to help off-set the costs of homeownership.
- Rising Interest Rates. While not historically a major factor in our second-home market, the jump in interest rates from the low 3%’s to 5.5 – 6.5% is having a small impact – unfortunately, it seems to be hurting our local population more than 2nd homeowners.
- The Stock Market – Historically, Summit County’s buyer activity is directly related to the stock market. The better the stock market is doing, the more buyer activity we see. With the volatile market, buyer activity has waned, which has resulted in an increase in inventory in the Summit County residential market. However, we are still at historic lows and it will take a significantly larger increase in this inventory before we see a lowering of prices.
Experts are calling for home prices to appreciate next year, although at a slower pace than the previous three years. The reason for this is simple. The dynamics of supply and demand are playing out in real estate and will continue for many years to come.