The best and worst cities for home price appreciation through 2018

Julie C. Nichols General – Trey Garrison

Home price appreciation will slow to an average of 2.1% between 2015 and 2018 as supply and demand move into equilibrium, according to a new report by the Demand Institute. That average naturally means that some communities will see bigger gains and some less. By 2018, the national median price for such a home will not quite have reached its nominal 2006 peak, but it will be close, the report says. Adjusted for expected inflation rates, however, the median home price will stand 25% below its 2006 level.

The main driver of housing demand in the next five years will be the number of people forming new households. For almost six years following the financial crisis, many young people found it difficult to set out alone financially. The Demand Institute suggests that in 2014, household formation is likely to snap back to a rate of nearly 1.3 million net new households. Such a rebound in household formation will fuel a higher pace of housing completions, which collapsed in the Great Recession. Total housing completions will near 1.5 million by 2015.

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