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Property Appreciation Slows, Housing Peak Could Be Seen Soon

Property appreciation is slowing, a sign that the U.S. is nearing the peak of the current housing cycle. Housing prices are 7.3 percent above their long-term pricing trend, with minimal downward pressure on the demand for homeownership, according to “Where Are We Now with Housing: A Report,” a study from Florida Atlantic University College of Business.

“All evidence is suggesting that the national housing market is peaking,” said Ken Johnson, a real estate economist at Florida Atlantic University College of Business and author of the study. “However, this time around from a national perspective, things should turn out quite differently. “It looks like we’re in for more of a very high tide, as opposed to a tsunami, as residential prices peak in this latest cycle. At a minimum, we can expect flatter housing price growth. At worst, we could experience price declines slightly below the long-term pricing trend.”

For comparison, at the peak of the last housing cycle, prices were 31 percent above their long-term pricing trend. Johnson’s BH&J Index was nearing a score of 1, the highest possible score, in the summer of 2006, indicating extreme downward pressure on the demand for home ownership. Today, that score stands at 0.04.

The study compares the U.S. housing market of 2018 with the housing peak at the end of last cycle in July 2006. The  results of the survey are based on scores from the Beracha, Hardin & Johnson Buy vs. Rent Index, and data from the S&P CoreLogic Case-Shiller 20 City Composite Home Price NSA Index.

 

 

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