Housing Appreciation and Inflation: Future Outlook?

[Sytes]

Looking for a crash course, Housing Market 101.

How to gauge the crystal ball for future housing valuation...

Working within these sites for statistics... Based on what I see (as a rookie), It appears 2027-2028 may be an approximate time frame for the historical value to reach our recent peak home sales(?)...
Head/tails of where we were, are, and will be for the purchase of houses - future real estate valuations moving forward?

Real estate has always been a dependable "nest egg". Thoughts on the housing market?



Sites used:

Housing Statistics and Real Estate Market Trends

NAR provides housing statistics and real estate market trends on the national, regional, and metro-market level where data is available.

www.nar.realtor

United States FHFA House Price Index

Housing Index in the United States increased to 436.50 points in January from 435.80 points in December of 2024. This page provides the latest reported value for - United States House Price Index MoM Change - plus previous releases, historical high and low, short-term forecast and long-term...

tradingeconomics.com

 

[sclancy27]

Looking for a crash course, Housing Market 101.

How to gauge the crystal ball for future housing valuation...

Working within these sites for statistics... Based on what I see (as a rookie), It appears 2027-2028 may be an approximate time frame for the historical value to reach our recent peak home sales(?)...
Head/tails of where we were, are, and will be for the purchase of houses - future real estate valuations moving forward?

Real estate has always been a dependable "nest egg". Thoughts on the housing market?



Sites used:

Housing Statistics and Real Estate Market Trends

NAR provides housing statistics and real estate market trends on the national, regional, and metro-market level where data is available.

www.nar.realtor

United States FHFA House Price Index

Housing Index in the United States increased to 436.50 points in January from 435.80 points in December of 2024. This page provides the latest reported value for - United States House Price Index MoM Change - plus previous releases, historical high and low, short-term forecast and long-term...

tradingeconomics.com

We bought a house in early October. We had conversations about expecting a 15-20% drop in housing prices and how that factored into our decision before we bought. In the end, if it drops 20% or more in the short-term we wanted to position ourselves in a situation where we could still take advantage even with owning 1 home. So that is what we did.

IMO, location is more important now than ever before, we bought with that in mind. A confounding factor, or at least something that could delay housing price declines, is high interest rates. It is something like 80+% of 'homeowners' have rates 5% or under. This could keep inventory levels from jumping way up because people won't sell their homes to upgrade and take on a much larger rate. We may enter a time with very little supply from existing homes, little to no supply from builders, and still some demand from all these Gen Z-ers and Millenials that haven't purchased yet.

In the end, it's hard saying not knowing. Just be very comfortable with your decision.

 

[406LIFE]

If you are looking to invest, then I say keep at it. Even with ~6% borrowing, LTA will still go up. Short term, in western MT, I've seen a drop in prices but only 1-3%. Appraisals are still coming in strong.

If you're looking to buy to own, that might be a different story. Mortgage rates have dropped slightly of recent, but prices remain strong. I think we will see rates dip back to sub 5 in 2-3 years, but if you have a 2% better hang on to it. Consequently, HELOCS are WAY up; people tapping into that new equity but not touching the primary mortgage.

 

[SAJ-99]

Looking for a crash course, Housing Market 101.

How to gauge the crystal ball for future housing valuation...

Working within these sites for statistics... Based on what I see (as a rookie), It appears 2027-2028 may be an approximate time frame for the historical value to reach our recent peak home sales(?)...
Head/tails of where we were, are, and will be for the purchase of houses - future real estate valuations moving forward?

Real estate has always been a dependable "nest egg". Thoughts on the housing market?



Sites used:

Housing Statistics and Real Estate Market Trends

NAR provides housing statistics and real estate market trends on the national, regional, and metro-market level where data is available.

www.nar.realtor

United States FHFA House Price Index

Housing Index in the United States increased to 436.50 points in January from 435.80 points in December of 2024. This page provides the latest reported value for - United States House Price Index MoM Change - plus previous releases, historical high and low, short-term forecast and long-term...

tradingeconomics.com

It kind of depends what you are thinking - buying? selling? renting? when? where? etc.
General rules
- All real estate is local.
- People buy based on the monthly payment, not the total price. So rates are important drivers of price.
- NAR forecasts are a joke. Have some confidence in their actual, measured data but not what they say about the future.

Home Sellers Are Slashing List Prices at a Record High Rate

Thanks to high mortgage rates and a slowdown in the market, a whopping 22% of homes for sale dropped asking prices in September.

money.com

 

[Sytes]

Trying to understand our current position and how extrapolate #'s that are steps beyond guessing.
In common-speak, how does one best get a bearing on home value, six years from now?

General background info:

Sold property/house. Walked away debt free inclusive of our 2020+ vehicles, a 2020 Boat, and a quality chunk of $. We had two options from Gov't Living Quarters Allowance, (LQA):
1. Rent/Lease up to X value, (LQA paid).
or
2. Own and receive bi-weekly, up to the same X value, (LQA paid).

X value adjusts bi-weekly up / down. Historically, very little volatility. To own, it's 10% the house value annually / 26 pay periods - up to X value.

We went w/ #2 and placed our chunk of $ into the house we purchased that exceeded LQA's X value, thus we will always receive max LQA. The amount we invest of our personal $ has no bearing on the LQA paid to us bi-weekly. We currently receive about 2x's our mortgage in *LQA.
*LQA is 100% tax free.

With that background, our house was purchased Feb this year. It's a bit under the peak of market sales though not by much to speak - and now I am looking for a "101" course to make sense of the unique crystal Ball Covid has presented for housing prices, going forward. Also, the best bang for our buck on the additional LQA $. I was thinking of placing it into my TSP (Gov't version of 401). Over 50 - I'm able to place an additional $6,500 annually. However, it would be convenient to keep the liquidity for use to offset any loss, come time to sell our house.

And this is our key interest: We intend to follow through with our entire six years w/ LQA and retire out (57). A bit on this aspect: Because I'm in a mandatory retirement position (FERS), they bridge my retirement through 62. Basically what I'd receive at 62, is my bridge income. I'm still able to seek employment though can not exceed 80% of my high three earnings. This is fine as I'm set for 30 hour contract work for the Gov't.

Basically various key factors play into the end goal: Retirement. Key concern whether our chunk of $ in this house is worth the return and that boils down to the ability to sell within reasonable value at our purchase price.


Crude mouse drawing based on 6 year increments since 1992 for house value.

 

[Deleted member 28227]

@Sytes been thinking about this hard last couple of weeks, thanks for starting the thread as I'm curious to what people have to say.

We are looking at buying in the next few months, with the knowledge we will be selling in 4-5 (years).

I'm not trying to make a bunch, but I'm definitely worried about losing some and/or struggling to sell when we want to leave.

 

[brymoore]

Simply based on economic cycles, 5-6 years seems short for there to be enough time to have a decline and a rise to peak in prices. I’d push it out a few years for the peak to occur.

However, I don’t know what’s going to happen to the economy. Powell might get lucky and stop inflation without a recession. If he does, he’ll lower rates sooner which should help housing prices.

 

[TOGIE]

as i must always caveat myself in thes threads: i actually don't know $%^& about #!$%

isn't the best time to buy always yesterday? of course not. but kinda, sometimes, right?

but even moreso, isn't just sort of a fools errand to really try and predict the near term housing market in any way?

i'm just wondering if my wife and i will be in our freshly built house for 3-4 more years or 20 more years. we think about moving back to south metro denver to be nearer our families, everyone is clumped down there, in laws and everyone and we're basically the only offshoot in northernish colorado in the family. it's a 1st world problem pain in the ass. i'd hoped being a little further away would just cause us to go to fewer family gatherings and free up more weekends for us but nope.

at least for us, how rates settle out over the next 5 year will be the primary determining factor for that, not housing prices, like @SAJ-99 mentioned. if we're moving i don't want our total mortgage payment to change dramatically and that bottom line is primarily rate sensitive. so somewhat to his point, i feel like where rates settle and hang out is going to among several things, the primary driver of what we see over the next 3,4,5, or hell even 10 years.

and how the hell they settle? let's start the bidding shall we? i don't reallly wanna bet on what i think will happen cause who the heck knows.

 

[SAJ-99]

Trying to understand our current position and how extrapolate #'s that are steps beyond guessing.
In common-speak, how does one best get a bearing on home value, six years from now?

General background info:

Sold property/house. Walked away debt free inclusive of our 2020+ vehicles, a 2020 Boat, and a quality chunk of $. We had two options from Gov't Living Quarters Allowance, (LQA):
1. Rent/Lease up to X value, (LQA paid).
or
2. Own and receive bi-weekly, up to the same X value, (LQA paid).

X value adjusts bi-weekly up / down. Historically, very little volatility. To own, it's 10% the house value annually / 26 pay periods - up to X value.

We went w/ #2 and placed our chunk of $ into the house we purchased that exceeded LQA's X value, thus we will always receive max LQA. The amount we invest of our personal $ has no bearing on the LQA paid to us bi-weekly. We currently receive about 2x's our mortgage in *LQA.
*LQA is 100% tax free.

With that background, our house was purchased Feb this year. It's a bit under the peak of market sales though not by much to speak - and now I am looking for a "101" course to make sense of the unique crystal Ball Covid has presented for housing prices, going forward. Also, the best bang for our buck on the additional LQA $. I was thinking of placing it into my TSP (Gov't version of 401). Over 50 - I'm able to place an additional $6,500 annually. However, it would be convenient to keep the liquidity for use to offset any loss, come time to sell our house.

And this is our key interest: We intend to follow through with our entire six years w/ LQA and retire out (57). A bit on this aspect: Because I'm in a mandatory retirement position (FERS), they bridge my retirement through 62. Basically what I'd receive at 62, is my bridge income. I'm still able to seek employment though can not exceed 80% of my high three earnings. This is fine as I'm set for 30 hour contract work for the Gov't.

Basically various key factors play into the end goal: Retirement. Key concern whether our chunk of $ in this house is worth the return and that boils down to the ability to sell within reasonable value at our purchase price.


Crude mouse drawing based on 6 year increments since 1992 for house value.

View attachment 253857

I think I understand where the numbers are coming from and how they fit. My question is what is your question- if that makes sense. Why do you want to hedge the value of your house? or are you trying to figure out how to invest the excess of the LQA - Mtg payment?

 

[Sytes]

I think I understand where the numbers are coming from and how they fit. My question is what is your question- if that makes sense. Why do you want to hedge the value of your house? or are you trying to figure out how to invest the excess of the LQA - Mtg payment?

Compounded question-s. though the core intent is to understand what #'s work best to step beyond guessing and hold a basic understanding of what the short term future holds for the housing market when hit by all time high values. One Q would be: When would the market's common appreciation reach the recent peaks? Peaks defined as a dip due to gov't interest manipulation for purpose to moderate inflation.
The additional is to identify if/how to take the additional LQA to offset potential adverse housing prices - short term 4-6 years, if it dips and does not return?

The core is based on housing value short and mid term.

Any mortgage brokers here who have a pulse would be a bonus to understanding as well.

 

[fmnjr]

First time I bought a home was in the late 70s early 80s. Home was 60K, 10% down, 10% interest we bought it, we needed a place to get started. Today that home is 300K+ and rising. If your focus is on long term, forecasting makes sense. Not so much on short term, even though it is still a worthwhile exercise as it helps you understand things more fully. Another home purchase took place in 93 for 98.5K, that home is now 300K+. On two other occasions we got dumb lucky and bought the absolute bottom and killed it. If things dump enough in this cycle, we'll jump again. We don't take the short view, it's too stressful for us.

 

[Irrelevant]

@Sytes been thinking about this hard last couple of weeks, thanks for starting the thread as I'm curious to what people have to say.

We are looking at buying in the next few months, with the knowledge we will be selling in 4-5.

I'm not trying to make a bunch, but I'm definitely worried about losing some and/or struggling to sell when we want to leave.

A potentially good play if the 4-5 is months, or heck, even if it's years, is to buy cheap, live well below your means, then keep it to rent, even if you do it remotely with a management co, you'll be in an area that will always have high(ish) demand for rentals.

I friend of my cautioned to never view your house as an investment. It's your house, buy it to live in, and if you make money at some point that's just cream on the top.

 

[Deleted member 28227]

A potentially good play if the 4-5 is months, or heck, even if it's years, is to buy cheap, live well below your means, then keep it to rent, even if you do it remotely with a management co, you'll be in an area that will always have high(ish) demand for rentals.

I friend of my cautioned to never view your house as an investment. It's your house, buy it to live in, and if you make money at some point that's just cream on the top.

Yeah that's kinda what I was thinking. Banks will approve you for an absurd amount of money, but I think I want our price point to be something that in the future doesn't price out too many folks both from the renting and/or buying perspective.

Question is do we try and wait a couple months for things do go lower or just buy sooner... we have a while before we need to move.

 

[Irrelevant]

Question is do we try and wait a couple months for things do go lower or just buy sooner... we have a while before we need to move.

Buy a house you want to live in and leave it at that. Don't let the timing dictate it.

 

[WapitiBob]

A potentially good play if the 4-5 is months, or heck, even if it's years, is to buy cheap, live well below your means, then keep it to rent, even if you do it remotely with a management co, you'll be in an area that will always have high(ish) demand for rentals.

I friend of my cautioned to never view your house as an investment. It's your house, buy it to live in, and if you make money at some point that's just cream on the top.

I concur. I played the game with millions in residential and commercial real estate and it worked great, right up until it didn't.

 

[brymoore]

I look back at the values in 2008 RE peak and wish I could invest at those prices today.

You might be overthinking the long term strategy.

Buy and hold still works.

 

[Sytes]

So how does one step beyond the guess and a few steps towards estimates? Short term.

I believe that's Wllm and my personal interest. Mine is dictated by the terms of my employment. His appears to be venture return on $ in real estate.

 

[fmnjr]

Buy a house you want to live in and leave it at that. Don't let the timing dictate it.

I hate it when people do this ^^^^^, but ^^^^^ neffa3 has it right.

 

[SAJ-99]

Any mortgage brokers here who have a pulse would be a bonus to understanding as well.

They all got laid off. Kidding, but not kidding.

Let's see if I can help with the immediate question. The index values are just raw numbers. Just want to "show my work".

1992 Q3 housing index = 172.81
2022 Q3 housing index = 628.88
Compounded annual rate of Return (CAGR) = 4.28%

Let's cut off the COVID bump.
1992 = 172.81
Q3 2019 = 441.05
CAGR = 3.40%

Take the Q3 2019 value and CAGR and apply to the next 3yrs. Q3 2022 pro forma is 487.58.
How overvalued are prices today versus trend? about 29%.

Where will be in six years? take 2019 value of 441.05 and move it forward at PreCovid CAGR. Value is 595.92. Based on this, if prices don't move, 6yrs from now we are still overvalued versus trend by about 5.5% (628 v. 596)

I acknowledge all the problems with this analysis. It requires faith in future being like the past. As Yogi Berra said, "It's tough to make predictions, especially about the future."

Edit on date

 

[SAJ-99]

When would the market's common appreciation reach the recent peaks? Peaks defined as a dip due to gov't interest manipulation for purpose to moderate inflation.
The additional is to identify if/how to take the additional LQA to offset potential adverse housing prices - short term 4-6 years, if it dips and does not return?

OK, back to the desk and saw the questions.
1) When would the market's common appreciation reach the recent peaks? Peaks defined as a dip due to gov't interest manipulation for purpose to moderate inflation.
Housing data lags. The peak is probably Q3 in the data set I showed and Case-Shiller data has already rolled over. But the government will never stop manipulating interest rates, so the premise might be flawed. Where we are now says the Fed isn't cutting rates any time soon unless the economy tanks. Housing needs to catch-up to new rate reality. That takes time. Once the Fed stops raising, it will take 12months for consumers to re-anchor on the new rate regime.

2) identify if/how to take the additional LQA to offset potential adverse housing prices - short term 4-6 years, if it dips and does not return? You can't hedge the value of your home. CME has futures based on Case-Shiller, but they don't trade much. Housing data so slow, it sort of makes sense they never took off. Hopefully you locked in a low mortgage rate. That is the best hedge you have without taking on some correlation risk. If you have a set date for something (buying, retiring) and don't want to take the risk, shares has diversified bond ladder etfs. For example, IBDS has a yield to maturity of 5% and essentially matures in Dec 2027. It's like owning a single bond but in diversified form.

I think the most likely scenario for housing is it chops for a long time. Homeowners didn't over borrow like 2006-2008. Mortgages are locked in at low rates, so people stay in their homes. Short of an economic collapse, people won't be forced to sell, which is what causes prices to drop dramatically. I figure we drop in near term and then basically flatline for 3-5 yrs.

We are looking at buying in the next few months, with the knowledge we will be selling in 4-5 (years).

I don't see how you walk away making money in that scenario, especially given the transaction costs with selling a home. Unless you know someone with a Realtor license that will do for free.

I friend of my cautioned to never view your house as an investment.

Yeah, it's a horrible investment. I guess that should be in my list of Housing Market 101.

Another home purchase took place in 93 for 98.5K, that home is now 300K+.

So your CAGR is like 4%, not including taxes, fees, cost of maintenance, etc. You could argue it is better than renting, which is most likely true.