Tuesday, October 13, 2020 / by Vyral Marketing
What Would It Take for Prices to Drop?
It’s no secret we’re entrenched in a seller’s market, but lately many people have been asking, “What would it take for housing prices to drop?” To answer this question, let's take a look at some of the factors that will play a huge part in determining the future of our Phoenix area real estate market.
At 0:46 in the video above, you’ll see a chart that’s probably the best indicator of what we can expect for future pricing—the “Cromford Market Index as a Predictor of Future Annual Price Appreciation” model. On this chart, the black line represents the leading indicator (the Cromford Market Index itself), while the blue lines represent the actual appreciation rate (i.e., the percentage by which housing prices changed from year to year or month to month).
Back in 2005, you’ll see that the leading indicator peaked at 312.3. Just a few months beyond that mark, appreciation skyrocketed. A few years later, appreciation had already begun to decline, and in 2007 and 2008, we saw a rapid descent that culminated in 2009’s massive depreciation. Where the black line goes, the blue lines always seem to follow.
"Our best projection indicates that we won’t
see massive depreciation for a couple more years."
For those who are worried about a repeat of 2009 playing out in the near future, consider this: As of right now, the leading indicator is marked at 348.5—way higher than its previous peak in 2005. If we trust history, then we should expect prices to absolutely soar soon as they chase after that leading indicator. However, after reaching unprecedented heights, logic says they’ll indeed come tumbling down, but we won’t see that huge depreciation period for another two to three years.
Knowing what may lie ahead, it’s all the more important to keep a close eye on the supply and demand in our market. If you’re waiting for prices to go down, our best projection indicates that you’ll be waiting for at least another couple of years. That said, if you’re hoping to take advantage of the current market (e.g., insanely low interest rates), then buying now may still be a great call.
Feel free to reach out to me via phone or email if you have any questions regarding your particular situation. I’m always here to help, and I’d love to hear from you.