In the Reno-Sparks market the median home prices are on the rise and many are concerned.  Is this a bubble?  Many experts say no.  The graph below shows what a steady 1% appreciation per quarter would look like over time (blue line) and what our actual market appreciation looks like (red line).  In the Reno-Sparks market we exceeded that normal trajectory back in 2016.  With a supply and demand imbalance we may continue to see prices rise, widening the gap between our market and the steady appreciation rate.UNR-Housing-Bubble-Report 3rd Q2017

Sellers that have been thinking about selling – NOW is a great time.  The future is a bit uncertain with interest rates on the rise etc.  The Shocket Team can show you what your home is worth and suggest strategies to maximize your return.

Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:

“The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.”

Seventy-one consecutive months of price increases may have some concerned that current home values may be overinflated.

However, at the same time, Zillow issued a press release which revealed:

“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”

Here are two graphs that help show why home prices are exactly where they should be.

The first graph shows actual median home sales prices from 2000 through 2017.

Are Home Values Really Overinflated? | MyKCM

By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a rollercoaster ride that is about to take another turn downward.

However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.

Are Home Values Really Overinflated? | MyKCM

The blue bars on this graph represent were prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.

Bottom Line

Based on historic appreciation levels, we should be very comfortable that current home values are not over-inflated.