There was considerable talk about a potential recession that could crash the housing market. Some media outlets even predicted home prices would drop by as much as 10-20%, which might have made you hesitant about buying a home.
However, what actually happened was that home prices increased more than usual. Brian D. Luke, Head of Commodities at S&P Dow Jones Indices, explains:
"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 into context, data from Freddie Mac shows how home prices have changed each year since 1980. The dotted line on the graph represents the long-term average for appreciation:
The key takeaway is that home prices almost always rise. As Forbes notes:
". . . the U.S. real estate market has a long and reliable history of increasing in value over time."
Since 1980, the only time home prices declined was during the housing market crash, indicated in red on the graph. Fortunately, the current market is not like it was in 2008. For one, there are not enough homes available to meet buyer demand. Additionally, homeowners now have significant equity, putting them in a much stronger position than they were back then. This means there won't be a surge of foreclosures that drives prices down.
The fact that home values increased every year except for those four years in red is why owning a home can be one of the smartest decisions you can make. As a homeowner, you possess an asset that typically gains value over time. As your home's value appreciates, your net worth grows.
If you're financially stable and ready for the costs and responsibilities of homeownership, buying a home might be a wise decision for you.
The bottom line is that home prices tend to increase over time, making buying a home a smart move if you're prepared. Connect with a local real estate agent to discuss your goals and explore available options in your area.
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