Going into 2023, there was a lot of talk about a possible recession that would cause the housing market to crash. Some in the media were even forecasting home prices would drop by as much as 10-20%. That might have made you feel a bit unsure about buying a home.
But here’s what actually happened. Home prices went up more than usual. To put last year’s growth into context, the graph below uses data from Freddie Mac on how home prices have changed each year going back to 1980. The dotted line shows the long-term average for appreciation.
The U.S. real estate market has a long and reliable history of increasing in value over time.
In fact, since 1980, the only time home prices dropped was during the housing market crash (shown in red in the graph above). Fortunately, the market today isn’t like it was in 2008. For starters, there aren’t enough available homes to meet buyer demand right now. On top of that, homeowners have a tremendous amount of equity. They are on much stronger footing than they were back then. That means there won’t be a wave of foreclosures that cause prices to fall.
The fact that home values went up every single year except those four in red is why owning a home can be one of the smartest moves you can make. When you’re a homeowner, you own something that typically becomes more valuable over time. And as your home’s value appreciates, your net worth grows.
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