Normal Seasonality for Home Price Appreciation Has Returned

If you're considering a move, one of the most pressing questions you likely have right now is: What's occurring with home prices? Contrary to what you may hear in the news, home prices are not declining nationally. Price growth is simply beginning to normalize. Here is the necessary context for comprehending this trend.

Every year, there are predictable ebbs and flows in the housing market. It's known as seasonality. Spring is the busiest season for homebuyers, with the market at its busiest. This activity is usually still active in the summer, but it tends to decline as the cooler months approach. Seasonality affects home values because prices rise when something is in great demand.

That’s why there’s a reliable long-term home price trend. The graph below uses data from Case-Shiller to show typical monthly home price movements from 1973 through 2022 (not adjusted, so you can see the seasonality):

According to the data, housing prices rise at the start of the year, but not as much as they do in the spring and summer markets. Because fewer individuals 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. Then, as autumn and winter arrive, activity slows down again. Price growth slows, yet continues to rise.

Today's rising mortgage rates helped usher in the first hints of seasonality after several rare 'unicorn' years. According to Selma Hepp, Chief Economist at CoreLogic:

“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.”

Why This Is So Important to Understand

In the coming months, you’re going to see the media talk more about home prices. In their coverage, you’ll likely see industry terms like these:

• Appreciation: when prices increase.
• Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
• Depreciation: when prices decrease.

Don't allow the lingo to throw you off or any deceptive headlines to scare you. The market's recent fast pace of home price growth was unsustainable. It had to slow down at some point, and that's what we're seeing now: a slowing of appreciation rather than devaluation. 

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.

Bottom Line

While the headlines create panic and uncertainty about what is occurring with housing prices, the fact is straightforward. The seasonality of home price appreciation is returning. Let's talk about what's going on with prices in our area if you have any questions.