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Real estate is likely to appreciate over time in any housing market, but experts are providing mixed feedback on what short-term returns homeowners could see in today’s market. According to real estate platform Realtor.com, the average five-year return on U.S. home prices has been +26% since 1975, with the average one-year return sitting at about +4.7%.
But local market dynamics may tell a different story. For example, when it comes to the highest average five-year returns, there's Massachusetts (+36%), Rhode Island (+34%), and California (+34%), while the lowest average five-year returns have been seen in Oklahoma (+14%), West Virginia (+15%), and Louisiana (+15%).
And when it comes to what's in store for home prices, affordability challenges in the current U.S. housing market have split expert opinion regarding what the future holds for short-term home price returns.
The recent pandemic housing boom and mortgage rate shock have stretched affordability relative to income. Moody's and similar groups suggest that this affordability pressure could constrain short-term home price growth. Meanwhile, analysts at Goldman Sachs believe that the lack of supply will outweigh affordability concerns, pushing national home prices slightly higher over the next few years.
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