Housing Values Continue to Rise, but at a More Sustainable Rate

If you find yourself confused about the current state of home prices, you're not alone. Despite data confirming an increase, there are still individuals claiming that prices are decreasing. This confusion stems from both unreliable sources of information and some media outlets misinterpreting the actual data.

To simplify matters, let's cut through the noise and focus on the facts, relying only on trustworthy data sources.

Normal Home Price Seasonality Explained

In the real estate market, there are predictable ups and downs that occur throughout the year, a phenomenon known as seasonality. Spring is the peak homebuying season, when activity is at its highest. This momentum typically remains strong throughout the summer but starts to taper off as the cooler months approach.

Home prices mirror the seasonal pattern because they appreciate most when demand is high. This is why there's a consistent long-term trend in home prices. The graph below, based on data from Case-Shiller, depicts the typical percentage change in monthly home price movement from 1973 to 2022 (unadjusted, to illustrate seasonality).

As the data shows, at the beginning of the year, home prices grow, but not as much as they do when entering the spring and summer markets. That’s because the market is less active in January and February since fewer people move in the cooler months. As the market transitions into the peak homebuying season in the spring, activity ramps up, and home prices go up a lot more in response. Then, as fall and winter approach, prices still grow, just at a slower pace as activity eases again.

This Year, Seasonality Has Returned

Now, let's examine how the current year compares to the established long-term trend (refer to the graph below):

Here's the most recent data for this year from the identical source. Similar to the previous comparison, the dark bars depict the enduring trend, while the green bars illustrate this year's developments. It's evident that the green bars are aligning with the typical market patterns, signifying a positive trend. This is advantageous as it indicates more sustainable price growth compared to recent years.

In essence, home prices are not declining nationwide; rather, price growth is beginning to stabilize. It's likely that the media will misinterpret this moderation of home price growth as a decline. Therefore, it's crucial to exercise caution and not accept everything you read at face value. The data presented here provides the context necessary to fully comprehend the current market dynamics. If you encounter any confusing headlines, seek clarification from a trustworthy real estate professional.

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

Home price growth is aligning with its traditional seasonal pattern, indicating a stabilizing market. For more information on the local real estate landscape, consult with a knowledgeable real estate professional.