Making sense of the latest home price headlines.
If you’re in the process of buying or selling a home, you’ve likely encountered a whirlwind of headlines about home prices. It’s completely understandable if you’re feeling a bit uncertain in the face of conflicting information.
One of the challenges in deciphering these headlines is how they frame the discussion. Many negative reports are rooted in comparisons with the extraordinary years when home prices reached unsustainable highs. These headlines tend to create anxiety about the future of the real estate market.
However, it’s crucial to recognize that the steepest home price declines are already behind us. In our local area, we experienced minimal, if any, decline. What we’re seeing now is a return to a more typical pattern of home price appreciation, which is easier to comprehend when we focus on what’s customary for the market and acknowledge that the past few years were anomalies.
To make sense of home price trends, let’s begin by considering seasonality in real estate. The housing market experiences predictable ebbs and flows throughout the year. Spring emerges as the peak home-buying season when market activity is at its zenith. This fervor persists through the summer but gradually wanes as the cooler months approach. Home prices, too, follow this seasonal rhythm because prices tend to appreciate when demand is high.
Before the unusual years we’ve just witnessed, there existed a consistent, long-term home price trend. A graph of data from Case Shiller spanning 1973 to 2021 illustrates the typical monthly movement in home prices. The data, which isn’t adjusted for seasonal variation, clearly shows the cyclical nature of the market.
At the outset of the year, home prices increase, though not as significantly as during the spring and summer months. The reason is simple: the housing market is less active in January and February as fewer people choose to move in the colder months. With the arrival of spring and the peak home-buying season, market activity surges, and home prices experience more substantial growth. As fall and winter approach, activity decreases, and price growth slows. Yet, it’s crucial to recognize that this is a typical pattern, marking the market’s transition into a more predictable seasonal rhythm.
As you continue to monitor the housing market, be prepared for headlines that may not accurately represent what’s occurring with home prices. Some reports may misinterpret slowing home price growth, often associated with seasonal market patterns in the fall and winter, as price depreciation or decline. It’s essential not to let these headlines confuse or alarm you.
If you have questions about the state of home prices in our local market, don’t hesitate to reach out. We’re here to provide you with the most up-to-date and accurate information. Feel free to call us at 1-800-722-2585 for a thorough discussion about the current state of the real estate market.