While this can be challenging for homebuyers, it is undeniably showing the strength and opportunity in the housing market and it is accelerating. It appears that home prices aren’t slowing down, but is it worth it to purchase even in a higher interest rate environment?
Zillow recently published an article showing forecasts of 4% home appreciation in the year 2023. While 4% does not seem like that much, it is very meaningful for wealth creation. If a customer bought a $500,000 home and saw a 4% annual appreciation, they would gain $20,000 in that year alone in appreciation. Also, if that same customer put down 20% or $100,000, that means that in one year they would have a 20% gain on their investment. Also, Zillow and Pulsenomics released their forecast for the next five years and it showed home appreciation at 23%, which is very significant. If someone were to buy a $500,000 home and saw 23% appreciation over the next 5 years, they would gain $115,000 in appreciation.
While interest rates are higher than they were a few years ago, in many cases, and based on these forecasts, it appears that it could cost more to wait and not purchase since there is such tight inventory and such high levels of demand even in the face of higher interest rates.
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By: Jon Iacono