If you’re a bit confused about the current state of home prices, you’re not alone. Despite data indicating otherwise, there are still claims that prices are dropping. This confusion stems from unreliable sources and misleading media coverage. To clarify things, let’s focus on the essential information backed by trustworthy data.
Normal Home Price Seasonality Explained
In the real estate market, there are regular patterns that occur each year known as seasonality. Spring marks the peak of homebuying activity when the market is at its most vibrant. This momentum usually continues into the summer but starts to taper off as the colder months approach. Home prices are influenced by seasonality because demand drives the most significant price appreciation. This creates a consistent long-term trend in home prices. The graph below, utilizing Case-Shiller data from 1973 to 2022, illustrates the typical percentage change in monthly home price movements over the years.
According to the data, home prices experience growth at the start of the year, although not as significantly as during the spring and summer markets. This is due to lower market activity in January and February when fewer people tend to move in the cooler months. As the market shifts into the peak homebuying season in spring, activity increases, leading to a more substantial increase in home prices. Subsequently, as fall and winter approach, prices continue to rise, but at a slower pace as activity tapers off once more.
This Year, Seasonality Has Returned
Now, let’s examine how this year stacks up against the established long-term trend (refer to the graph below):
Here’s the most recent data for this year from the same source. The dark bars represent the established trend, while the green bars illustrate this year’s developments. Notably, the green bars are aligning more closely with the typical market behavior, indicating a positive shift towards more sustainable price growth compared to recent years.
In essence, national prices are not experiencing a decline; rather, the pace of price growth is moving towards normalization. There’s a possibility of the media misinterpreting this deceleration in home price growth as an actual decline. Therefore, it’s advisable not to blindly trust headlines. The provided data offers the necessary context to truly comprehend the situation. If you come across confusing headlines, seek information from a reliable real estate professional. Remember, it’s standard for home price growth to slow down as the year progresses, this does not signify a fall. Instead, prices are increasing at a more measured pace.
Bottom Line
Home price appreciation is reverting to the typical seasonality, which is a positive development. If you have inquiries about the current price trends in our local area, feel free to reach out and connect.
