What’s Happening in Our Market

Joe Long of Guild Mortgage joins me today to dispel some common market misconceptions and share his perspective from the lending side of things. 

What’s going to happen with the market in 2020 and beyond? Many homeowners remember losing value in their homes from 2008 to 2012, but since 2013 home values have been recovering. Since homes have been appreciating for so long, many believe it’s time for a market correction. 

It’s important to understand that the market fundamentals we have now are different than the ones we had back then. Just because the market’s been appreciating for a while doesn’t mean there’s something wrong or properties will start losing value. From 2005 to 2008, we saw rapid appreciation that was unsustainable—prices rose as high as 10% per year. Historically, home values in Dane County appreciate 3% to 4% per year. That’s sustainable, so if homes keep appreciating at that rate, they’ll outpace inflation and, theoretically, never cool down. 

After 2013, the pace of home value recovery increased rapidly, but now it’s slowing and we’re settling into a nice, pillowy landing. Last year, home values statewide rose about 5%, and this year they’re predicted to rise between 3% and 4%. Some might see this slowdown as a bad thing, but this return to normalcy is a good thing. 

Based on the average prediction of where the market’s headed in the next five years, if you purchased a $250,000 house now, it would appreciate by $47,500 by January 2025—a nice, slow pace. 

You need a place to live no matter what, and you can either pay your landlord’s rent or your mortgage. Only one of you is getting that appreciation, so you might as well take advantage of that equity. Many people lost a lot of money during the previous recession, but the No. 1 reason people buy houses isn’t that it’s a financial investment but because they want to control where they live. 

Those who lost value starting in 2008 got it all back by 2017. If you bought a home and something were to go wrong, you’d be fine long-term. You’ll still pay off your mortgage and come out with a lot of equity. If nothing goes wrong, you’ll come out way ahead. 

If you have any lending questions, feel free to give Joe a call at (608) 729-5379 or email him at jlong@guildmortgage.net. If you have any other questions about the real estate market, don’t hesitate to call or email me anytime. I’d love to help you.