A key financial benefit of homeownership is the appreciation of your home over time, also known as home equity growth. During a hot market, you can almost hear the "ca-ching" of adding equity. When the market signals a slowdown, homeowners may worry if all of that added equity will simply slip away. This stems from the fact that many believe home values will instantly fall off a cliff the second there are any indicators of a slowing market. The reality is much different, and I've got the market trends to back it up!
In markets like Portland, OR & the surrounding cities, where the trends indicate a slowdown, home values typically don't drop; they just don't increase as quickly. Meaning instead of home values rising by 15% a year, they will increase by 4%. And we are seeing that activity showing up in the annual appreciation graph.
As we can see above, some locations show a negative appreciation amount in a particular year, but that doesn't necessarily need to be a cause for concern. The average annual appreciation should be approximately 4% to 6%. You will have years higher and lower, but the average should be within that range. Lake Oswego is one of the locations with a negative appreciation, so let's use Lake Oswego as an example:
2022 to date: 3%
= 9% Avg Annual Appreciation (2019 to Sept 2022)
So even with that negative appreciation in 2019, the average is still above the benchmark average annual appreciation of 4% to 6%. And that's a lesson that can translate across all of the locations. Even if we begin to see negative appreciation amounts in 2022, the market has been so overheated for the past few years that most locations will still average above the benchmark average of 4% to 6%. We can see this in the following graph showing the Average Appreciation for 2019 to YTD 2022.
Long story short, the trends aren't indicating a significant decrease in home values in the near future. But I will send out these graphs each month so we can keep an eye on the activity.
I hope you find this information helpful. Please remember I'm always here for any questions. 😃