The median home price in the United States rose steadily over 2015. Price increases developed due to a stronger economy- more people with jobs meant more people ready to purchase homes. As demand for real estate in the United States went up, supply had trouble keeping up. The result was higher prices. A recent report shows that the likelihood of a home price decline anytime soon is low.
The Arch Mortgage Insurance Company (Arch MI) Winter 2016 Housing and Mortgage Market Review researched the probability of a decline in home prices, and found that the chances for that are slim over the next couple of years. It found that there is only a 6 percent likelihood that home prices will drop before 2018. Areas that are more likely to see declines in home values are those in “Energy Patch” states: those that rely heavily on oil, coal, or natural gas production, like Alaska and Wyoming. These states are affected by the drops in oil, coal, and gas prices that have occurred over the last year. However, states without dependency on the energy industry probably won’t see price decreases in real estate.
Why is the likelihood of a home price decline so slim?
According to DeFranco, nation prices should be rising faster than inflation over the next few years. Low supply of homes for sale or rent, fairly good affordability, and a stronger economy that is adding 2 to 3 million jobs per year helps this case.
“Nationwide, the housing market is likely to strengthen over the coming year in spite of economic headwinds from a strong dollar and expected gradual rate increases by the Federal Reserve,” says Dr. Ralph G. DeFranco, senior director of risk analytics and pricing at Arch MI.
Don’t be discouraged by the low likelihood of a home price decline! It means that the economy is strong- and many homes are very affordable. To learn about some great real estate opportunities in Miami, contact RE/MAX Paradise today!