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Concern keeps growing over where house prices are headed for consumers caught in the supply and demand scenario that has sent prices soaring in the post-pandemic market.
Google reported last week that the search question “When is the housing market going to crash?” had spiked 2,450% in the past month. “Why is the market so hot?” searches had doubled in just a week. Are consumers right to worry that house prices may be in a bubble that’s about to burst?
Our Q1 2021 VeroFORECAST anticipates that home price appreciation will increase significantly over the next 12 months in the 100 most-populated markets, and 7% of that increase should occur in the First Quarter of 2022. Veros has maintained since the start of the coronavirus pandemic that home prices would perform, and they have done so, remarkably.
Much of that growth was driven by historically low-interest rates and changes in “working from anywhere” practices influenced by COVID-19. Those two factors, coupled with an acute shortage of housing supply, created a perfect storm for house prices to climb at unprecedented rates, even as the rest of the US economy suffered.
It is likely that once interest rates stabilize and rise to some degree, the nationwide market will return to a more typical pattern. This will be characterized by regional pockets of strength driven by migration patterns, solid fundamentals in many areas, and weaker markets with slight depreciation. These two indicators demonstrate house prices and demand may be nearing a peak, at least in some markets: The Mortgage Bankers Association denotes mortgage applications have declined over recent weeks, and Redfin reported that asking prices of newly listed homes have plateaued in the four week period that ended March 28.
Some highlights from the recent VeroFORECAST:
So, back to the title: Is housing in a bubble that’s about to burst? Not anytime soon. Veros is at the pulse of home valuations. Stick with us, we are your guide to the ever-changing real estate market.