Over the last two years, the rate of home prices appreciated at a dramatic pace. While that led to incredible equity gains for homeowners, it’s also caused some buyers to wonder if home prices will fall. It’s important to know the housing market isn’t a bubble about to burst, and home price growth is supported by strong market fundamentals.
To understand why price declines are unlikely, it’s important to explore what caused home prices to rise so much recently, and where experts say home prices are headed. Here’s what you need to know.
Home Prices Rose Significantly in Recent Years
The graph below uses the latest data from CoreLogic to illustrate the rise in home prices over the past year and a half. The gray bars represent the dramatic increase in the rate of home price appreciation in 2021. The blue bars show home prices are still rising in 2022, but not as quickly:
You might be asking: why did home prices climb so much last year? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was extremely high, and supply was record low.
Where Experts Say Prices Will Go from Here
While housing inventory is increasing and buyer demand is softening today, there’s still a shortage of homes available for sale. That’s why the market is seeing ongoing price appreciation. Mark Fleming, Chief Economist at First American, explains it like this:
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“. . .we’re still well below normal levels of inventory and that’s why even with the pullback in demand, we still see house prices appreciating. While there is more inventory, it’s still not enough.”
As a result, experts are projecting a more moderate rate of home price appreciation this year, which means home prices will continue rising, but at a slower pace. That doesn’t mean prices are going to fall. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:
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“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
Ryan Coleman, top real estate broker with Hometown Realty has seen markets like this before. Ryan has been in the business for over 23 years and knows how to handle listings when the market is changing. When asked about the Knoxville home prices he said,
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“There is a little softening in the Knoxville, Tennessee housing market but don’t expect home prices to drop like they did in 2008.”
In other words, even with higher mortgage rates, moderating buyer demand, and more homes for sale, experts say home price appreciation will slow, but prices won’t decline.
If you’re planning to buy a home in the Knoxville, Tennessee area, that means you shouldn’t wait for home prices to drop to make your purchase. Instead, buying a home in East Tennessee today means you can get ahead of future price increases, and benefit from the rise in prices in the form of home equity.
Bottom Line
Home prices in Knoxville skyrocketed in recent years because there was more demand than supply. As the Tennessee housing market shifts, Ryan Coleman with Hometown Realty is not forecasting a drop in prices, just a slowdown in the rate of price growth. To understand what’s happening with home prices in our area, let’s connect today.
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Real Estate With Ryan
👉 In this week’s episode, Ryan Coleman talks about the process of selling a home “As-Is”. Whatever it looks like, whatever the condition is the seller will leave it like that and the new owner will have to fix/replace or just simply change anything that is needed. If you want to learn more about selling an “As-Is”home be sure to check out the new episode! 👈
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