Last year, home prices went up faster than anybody felt was sustainable. What might surprise some is the market is still undervalued. In relation to incomes and a gradually improving economy, home prices are expected to remain undervalued through 2015.
The primary factor is the market “correction” we experienced over the last few years. That correction was actually an overreaction to the price surges of ’06-’07. Today, prices are essentially where they were in 2004, ten years ago. Allowing for normal price gains, that alone is enough to signal home prices are below what most would consider normal.
Given the slow but steadily improving economy, coupled with severe reductions in values, it is reasonable to expect some appreciation moving forward as incomes tend to trend up.
