Costlier Homes Expected To Appreciate 4% Annually For The Next Five Years

Published Friday, August 25, 2023 at: 8:33 PM EDT

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The value of a home nationwide is expected to rise by 1.3% in the 12-months through July 31, 2024, down from expectations for a 2.8% rise expected in the 12 months through the end of July 2023. However, expectations for home-price values varied widely by geographic region, and homes with higher values are expected to experience much higher growth in value than less-costly houses.

“While western states had strongest year-ahead house price expectations in 2021 compared with other areas of the country, the region now exhibits the weakest expectations for future growth,” according to the August 4 report by Joanne Hsu, Ph.D., director of consumer surveys at University’s of Michigan. Forty-six percent of consumers surveyed in western states expect home values to rise, down from 86% a year ago. Although 12% of western-state consumers surveyed in 2022 predicted home values would decrease over the next 12 months, this July 21% of western-state homeowners surveyed expect a decrease in value through the end of July 2024. 

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Homes in the top tercile of value — the top third percentile — had the strongest prospects both in the short and long run, according to the report. In the 12 months through the end of July, the value of a home in the top tercile is expected to rise by 1.9%, about twice as much appreciation as is expected from home in other 66% of the country. In addition, over the next five years homes valued in the top tercile are expected by consumers to grow in value by 4% annually versus 2.1% for home in the lowest tercile and 3.1% for home in the middle tercile.     

“Given the importance of homeownership for wealth accumulation, if these expected trends bear out, wealth inequality may widen,” according to Prof. Hsu. “Indeed, consumers with homes valued in the bottom tercile have had declining expectations over the last few years, indicating that affordability of these lower-valued homes may remain stable but that the wealth-building prospects of homeownership for lower-income families may not be strong.” Homeowners who perceived growth over the last year expect that growth to continue through July 2024.

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The Standard & Poor’s 500 stock index closed Friday at 4405.71, up +0.67% from Thursday, and up +0.82% from a week ago. The index is up +96.91% from the March 23, 2020, bear market low and -8.15% lower than its January 3, 2022, all-time high.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.   ​​​​​​​


Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

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