As 2023 begins, there has been much talk of a recession that could lead to a housing market crash. Some media outlets have even predicted that house prices will fall by 10-20%, which could lead to a lack of confidence in buying a home. But what actually happened is that house prices rose above normal. Brian D. Luke, Head of Product, S&P Dow Jones Indices:
“Looking back at the year, 2023 appears to have exceeded average annual home price gains over the past 35 years.”
To put last year’s growth in context, the chart below uses Freddie Mac data on how home prices have changed each year since 1980. The dotted line shows the long-term average of prices.
Takeaway sea? House prices almost always go up.
According to a Forbes article:
“. . . the U.S. real estate market has a long and reliable history of increasing in value over time.”
The only time home prices have fallen since 1980 was during the housing market crash (shown in red in the chart above). Fortunately, today’s market is not the same as it was in 2008. First, there are not enough homes available to meet current buyer demand. In addition, homeowners had enormous amounts of equity, putting them on a much stronger footing than they had at the time. This means there won’t be a wave of bankruptcies pushing prices down. With home prices rising every year outside of the Red 4, owning a home is probably one of the smartest moves you can make. If you own a home, you have something that becomes more valuable over time. And as the value of your home increases, so does your wealth.
So, if you are financially stable and ready to shoulder the costs and expenses of ownership, buying a home can make sense.
