Are Home Values Really Overinflated

Dated: 03/01/2018

Views: 162


Are Home Values Really Overinflated? | MyKCM

Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:

“The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.”

Seventy-one consecutive months of price increases may have some concerned that current home values may be overinflated.

However, at the same time, Zillow issued a press release which revealed:

“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”

Here are two graphs that help show why home prices are exactly where they should be.

The first graph shows actual median home sales prices from 2000 through 2017.

Are Home Values Really Overinflated? | MyKCM

By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a rollercoaster ride that is about to take another turn downward.

However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.

Are Home Values Really Overinflated? | MyKCM

The blue bars on this graph represent were prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.

Bottom Line

Based on historic appreciation levels, we should be very comfortable that current home values are not overinflated.

Blog author image

John Faber

John Faber has lived in West Michigan his entire life and with strong family ties in the area, he takes his clients' needs to heart and treats them like family when helping them buy or sell a home. J....

Latest Blog Posts

Are Home Values Really Overinflated

Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report: “The median

Read More

Existing Home Sales Reach Highest Pace In 11 Years

Some Highlights: Existing home sales are currently at an annual pace of 5.81 million, the highest pace since December 2006. The inventory of existing homes for sale has dropped

Read More

Competing Offers Highest And Best

In our current housing market you may have heard the words “we are accepting highest and best offers.” What exactly does that mean? Well, it could mean A LOT of things. But generally what the

Read More

Full Time VS Part Time

It’s no myth that full-time workers accomplish more than part-time workers, generally speaking. When it comes to real estate, wouldn’t you want someone who is dedicated to giving you their all?

Read More