Home Prices Are Still Rising, But at a More Normal Rate.
It is understandable if you are unclear about the current state of home prices. Even though data indicates otherwise, some people continue to claim that prices are declining. People are getting their information from untrustworthy sources, which contributes to this misconception. However, some media coverage is also to blame for distorting what the actual data indicates.
So, to keep things simple, here’s what you really need to know using real data you can trust.
Normal Home Price Seasonality Explained
In the housing market, there are predictable ebbs and flows that happen each year. It’s called seasonality. When the market is at its busiest, spring is the best time to buy a house. In the summer, that activity is usually still high, but as the cooler months draw near, it starts to decrease.
Home prices follow along with seasonality because prices appreciate most when something is in high demand. That’s why there’s a reliable long-term home price trend. The graph below uses data from Case-Shiller to show the typical percent change for monthly home price movement from 1973 through 2022 (not adjusted, so you can see the seasonality):
House prices rise at the start of the year, but not as much as they do when they enter the spring and summer markets, according to the data. Because fewer people move in the cooler months, the market is less active in January and February. As the market enters the peak homebuying season in the spring, activity increases, and home prices rise significantly. Subsequently, as autumn and winter draw near, prices continue to rise, albeit more slowly as activity slows down.
This Year, Seasonality Has Returned
Now, let’s look at how this year compares to that long-term trend (see graph below):
Here are the most recent figures from the same source for this year. The dark bars are the classic style, just like they were previously. The events of this year are represented by the green bars. The green bars are starting to match the typical range for the market, as you can see. That’s a good thing because it’s more sustainable price growth than we’ve seen in recent years.
In a nutshell, nationally, prices aren’t falling; it’s just that price growth is beginning to normalize. Moving forward, there’s a chance the media will misrepresent this slowing of home price growth as prices falling. So don’t believe everything you see in the headlines. The data included here gives you the context you need to really understand what’s happening. Therefore, do not just accept anything you read in the headlines at face value if you find it confusing. For more information, speak with a reputable real estate agent.
Remember, it’s normal to see home price growth slow down as the year goes on. And that definitely doesn’t mean home prices are falling. They’re just rising at a more moderate pace.
It is good to see that home price appreciation is returning to normal seasonality. Let us talk if you have any questions about the current state of prices in our neighborhood.