If you’re considering buying or selling a home, one of the main questions on your mind is probably: what’s happening with home prices? The lack of clarity on this topic is not surprising, and part of the problem lies in how headlines discuss prices.
The negative news is often based on comparing current statistics to those of the last few years, which were considered exceptional (‘unicorn’ years) due to record-high, unsustainable home prices. As prices are now returning to more normal levels, some people are portraying it as a negative development, causing fear about what the future holds. However, it’s important to note that the most significant declines in home prices have already occurred, and what we are witnessing is a gradual return to more typical home price appreciation.
To make it easier to comprehend home price trends, let’s concentrate on what’s typical for the market and exclude the last few years since they were exceptional and not representative of the usual conditions.
Let’s start by discussing the seasonal patterns in the real estate market. Throughout the year, there are predictable fluctuations in the housing market. Spring marks the peak homebuying season, characterized by high activity and demand. The summer months generally maintain a strong level of activity but start to decline as cooler weather approaches. Home prices follow this seasonality, with the highest appreciation occurring when demand is at its peak.
At the beginning of the year, home prices experience some growth, although not as much as during the spring and summer markets. This is because the real estate market tends to be less active in January and February, as fewer people move during the colder months. However, as the market transitions into the peak homebuying season in spring, there is a surge in activity, leading to significant increases in home prices. Then, as fall and winter approach, the market activity eases again, and while price growth slows down, there is still typically an overall appreciation in prices.
Why This Is So Important to Understand
In the upcoming months, as the housing market follows its more predictable seasonal pattern, you’ll likely come across numerous headlines that either misinterpret the state of home prices or are misleading. These headlines may use various terms to describe price changes, such as:
- Appreciation: Refers to when home prices increase.
- Deceleration of appreciation: Occurs when prices continue to rise, but at a slower or more moderate rate.
- Depreciation: Refers to when home prices decrease.
These headlines might mistake the typical slowing down of home price growth (deceleration of appreciation) during the fall and winter due to market seasonality and wrongly label it as falling prices (depreciation). Don’t let these headlines confuse you or create fear. Instead, keep in mind that it’s entirely normal to witness a deceleration of appreciation and a slowing in home price growth as the months progress.
Bottom Line
If you’re curious about the current situation of home prices in our local area, feel free to reach out, we would love to catch up!
