Some Highlights: The Federal Housing Finance Agency (FHFA) recently released their latest quarterly Home Price Index report. In the report, home prices are compared both regionally and by state. Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!

Home prices are at the top of everyone’s minds. Can they maintain their current pace of appreciation? Will rising mortgage rates negatively impact home values? Will the next economic slowdown cause prices to crash? Let’s try to answer these questions based on what has happened in the past as well as what we know about the current real estate market. The Impact of Rising Interest Rates We explained earlier this year that rising mortgage rates have not negatively impacted home prices in the past and probably wouldn’t this time either. Freddie Mac’s comments were very direct: “In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.” They were correct. So far this year, home values have continued to appreciate above normal historic percentages and it appears the gradual increase in rates has had little impact on prices. The Impact of an Economic Slowdown Many people fear that when the economy turns, we may see the same depreciation in home values as we did a decade ago. However, we recently reported that the same group of economists, real estate experts, and investment & market strategists who predicted the next recession will occur in the next 18-24 months have also projected that house prices will continue to appreciate for the next five years, albeit at smaller percentages. It Comes Down to Supply and Demand As always, home prices will be determined by the demand to purchase compared to the available inventory of homes for sale. For the last six years, demand has far exceeded the available supply which has resulted in the average annual appreciation to top 6% since 2012. That is far greater than the historic norm of 3.6% annual appreciation that we saw prior to the housing boom. There are currently small signs that housing inventory is slowly beginning to increase. Months supply of houses for sale matched last year’s numbers for the last two months after 37 consecutive months of decreasing inventory. New construction data has also shown positive signs that inventory will be increasing. As inventory begins to meet demand, we will see appreciation return to more normal levels. We are already seeing projections coming in lower than the 6.2% annual average we have seen more recently. CoreLogic is predicting that home values will appreciate by 5.1% over the next twelve months and the Home Price Expectation Survey calls for values to increase by 4.2% in 2019. Bottom Line Mark Fleming, Chief Economist at First American, explained it best: “We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”

There are many things that factor into the decision to buy a home. New research from the Urban Institute suggests that one of those things may be inherited from your parents. Children are More Likely to Own a Home if Their Parents Did According to an analysis of millennial homeowners, the homeownership rate of those whose parents rent their homes is 14.4%, while the rate amongst millennials whose parents are homeowners is 31.7%! “A young adult’s odds of homeownership are highly correlated with their parent’s homeownership. Without controlling for such factors as age, income, education, marital status, and race or ethnicity, there is a 17 percentage-point gap between the homeownership rate for young adults whose parents are renters and young adults whose parents are homeowners.” The study also revealed that as a parent’s net worth increases, so does the likelihood that their child will own a home. These two findings are not surprising as we know from the Survey of Consumer Finances that a homeowner’s net worth is 44x greater than that of a renter. So, a parent who is a homeowner will have more wealth which will, in turn, increase the chances that their children will own their own homes in the future. Below is a breakdown of the relationship between a parent’s wealth and a millennial’s likelihood to own a home. The Good News: The high homeownership rate amongst baby boomers (likely the parents of many millennials) is a great sign that millennials will want to own homes. We are already seeing this in the high-demand environment that we are currently experiencing in the starter and trade-up markets. Bottom Line Even though millennials took longer than many of the generations before them to start home searches of their own, the data shows that they will not be waiting much longer!