Two top analysts from Bank of America and Merrill Lynch forecast that home price increases will continue to moderate from the highs of the last 2 years and will peak in mid-2016.
This view is also held by the most recent home price model from Case Shriller. They forecast an annualized growth of 3 percent over 30 months compared to 11 percent in 2013 and the 9.5 percent annualized rate since prices bottomed in the fourth quarter of 2011. Then prices are expected to decline and not recover to the 2016 level until Q2 2022, an annualized rate of price growth over six years of 0. With this factored in, the annualized home price growth rate between Q1 2014 and Q2 2022 is expected to be 1.0 percent.
They expect prices to remain flat or unchanged for six years.
This is not bad news for investors who plan to buy and hold. It should also not scare you from flipping. As long as you have purchased below market and have taken into consideration that prices won’t increase much, you can still make money. We still have a shortage of nice houses on the market so if your house is priced right you wont have a problem.
As in any market, you make your money going in. Even if the market is dropping you can still make money as long as you build that into your ARV. If you figure on holding it for 3 months and then selling it, use a lower figure than what today’s arv might be to determine your price when buying.
