Residential Property Prices are Experiencing a Recovery

If you're keeping up with the current news, you might be feeling uncertain about the state of home prices and concerned about potential future developments. The headlines today are presenting an overly pessimistic scenario, causing unnecessary worry. However, it's essential to consider the bigger picture over the past year. Home prices did experience a decrease, but this is primarily due to the comparison with an extraordinary peak year that was well above the usual trend.

To ensure a fair comparison with the previous peak, it's important to examine monthly data, which reveals a significantly different and notably more encouraging narrative. While regional housing price trends may still differ across markets, let's take a look at the national data to gain a clearer understanding.

The graphs presented below utilize up-to-date monthly reports from three reliable sources to demonstrate that the most severe declines in home prices are now in the past, and there is a nationwide appreciation in prices.

Examining the monthly perspective, we can observe that the housing market's last year can be divided into two distinct phases. During the first half of 2022, home prices were rapidly rising. However, from July onward, there was a decline in prices (as indicated by the red line in the above graphs). Around August or September, the trend started stabilizing. Now, with the latest data for early 2023, these graphs also indicate a renewed upward trajectory in home prices.

The encouraging aspect is that all three reports indicate a consistent increase in prices for three or more consecutive months, which bodes well for the housing market. The month-over-month data clearly points to a national shift, affirming that home prices are once again on the rise.

Regarding home price trends, Craig J. Lazzara, Managing Director at S&P Dow Jones Indices, makes the following statement:

"If I were seeking to establish that the decrease in home prices, which commenced in June 2022, had unquestionably concluded by January 2023, the data from April would undoubtedly strengthen my position."

According to experts, one of the key reasons why home prices didn't experience a crash as some anticipated is the limited availability of homes relative to the high demand from potential buyers. Despite the current mortgage rates, the number of people interested in buying exceeds the inventory of homes available for sale.

Mark Fleming, Chief Economist at First American, elaborates on how the higher demand compared to the limited supply continues to exert upward pressure on prices:

"Throughout history, we've observed that higher interest rates may moderate the pace of rising prices, but they don't lead to a complete collapse. This holds particularly true in today's housing market, where the demand for homes consistently surpasses the available supply, thereby maintaining upward pressure on house prices."

Doug Duncan, Senior VP, and Chief Economist at Fannie Mae, affirms that home price growth is surpassing expectations due to the robust demand in the market.

"Housing prices continue to exhibit more robust growth than initially anticipated, a testament to the strength of demand driven by demographics."

Here’s How This Affects You

• Buyers: If you've been hesitant about purchasing a home due to concerns about its potential value decline, the knowledge that home prices have rebounded should provide you with some relief. Moreover, this presents an opportunity to own a property that typically appreciates in value over time.
• Sellers: If you've been holding off on selling your house due to worries about fluctuating home prices impacting its value, now might be an opportune time to collaborate with a real estate agent and list your property. The latest data indicates that the situation is starting to work in your favor, so you don't have to wait any longer to make a move.

Bottom Line

If you postponed your relocation plans out of concern for declining home prices, the most recent data indicates that the worst is already behind us, and home prices are experiencing national appreciation. To gain a better understanding of the local market conditions, consider teaming up with a local real estate agent who can keep you informed about the developments in your area.