If you’re considering a move, you're likely wondering about the current state of home prices. Despite media reports, national home prices are not plummeting; they are, in fact, returning to a more normalized pattern of growth. To fully grasp this trend, let's delve into the context.
The housing market operates with predictable ebbs and flows, following a yearly pattern known as seasonality. Spring marks the peak homebuying season, with high market activity. Summer maintains a strong pace but gradually slows as the year progresses. Home prices are directly affected by this seasonality, appreciating most when demand is at its peak.
This seasonal trend has led to a consistent long-term pattern in home prices. Utilizing data from Case-Shiller spanning from 1973 to 2022 (unadjusted for clarity on seasonality), we can observe this pattern. The data reveals that at the start of the year, home prices increase, albeit not as significantly as during the spring and summer months. This is because January and February witness reduced market activity due to the colder season. As the market transitions into the peak homebuying season in spring, both activity and home prices soar. Subsequently, as autumn and winter approach, activity tapers, and price growth decelerates, although it still shows appreciation.
After a series of exceptional 'unicorn' years, the introduction of higher mortgage rates has heralded the return of seasonality. Selma Hepp, Chief Economist at CoreLogic, explains, “High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.”
Understanding the Significance
In the upcoming months, you'll encounter more discussions on home prices in the media. Industry terms like 'appreciation,' 'deceleration of appreciation,' and 'depreciation' may feature in their reports. Don't let these terms confuse you, and don't succumb to misleading headlines that trigger unnecessary concerns. The breakneck speed of home price growth observed in recent years was unsustainable, and a slowdown was inevitable. What we are witnessing now is a deceleration of appreciation, not depreciation.
Remember, it’s entirely normal for home price growth to moderate as the year progresses, and this certainly doesn't imply a decline in home prices. They are merely appreciating at a more sustainable pace.
Conclusion
While headlines may be causing apprehension regarding home prices, the reality is straightforward. Home price appreciation is aligning with normal seasonality. If you have queries about price trends in our local area, please feel free to reach out and connect with us.
