Talk of a housing bubble is beginning to crop up as home prices have appreciated at a rapid pace this year. This is understandable since the appreciation of residential real estate is well above historic annual averages. According to the Federal Housing Finance Agency (FHFA), annual appreciation since 1991 has averaged 3.8%. Here are the latest 2020 appreciation numbers from three reliable sources:
- FHFA: 7.8%
- CoreLogic: 7.3%
- Case-Shiller: 7%
It’s easy to jump to the conclusion that house appreciation is out of control in today’s market. However, we need to put these numbers into context first.
Inflation and the Comeback from the Housing Crash
Following the housing crash, home values depreciated dramatically from 2007-2011. Values are still recovering from that unusually long period of falling prices. We must also realize that normal inflation has had an impact.
Bill McBride, the founder of the well-respected Calculated Risk blog, recently summed it up this way:
“It...
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