Home Prices Still Growing – Just at a More Normal Pace

If you find yourself a bit unclear about the current state of home prices, you’re not alone. Despite data indicating otherwise, some individuals are asserting that prices are on the decline. This misconception is partly fueled by unreliable sources of information and, at times, media coverage that misrepresents the true implications of the data.

To simplify matters, here’s the essential information you need, backed by reliable data you can trust.

Normal Home Price Seasonality Explained

Within the real estate market, there are recurring patterns that unfold each year, known as seasonality. Spring emerges as the prime season for homebuying, marked by heightened market activity. While this vigor tends to persist into the summer, it gradually diminishes as the cooler months draw near.

The trajectory of home prices aligns with these seasonal shifts, as prices experience the most significant appreciation when demand is at its peak. This established long-term trend in home prices is illustrated in the graph below, utilizing data from Case-Shiller to depict the typical percentage change in monthly home price movement from 1973 through 2022 (not adjusted for seasonality, allowing for a clear view of the trends).

As indicated by the data, home prices exhibit growth at the start of the year, although not to the same extent as during the onset of the spring and summer markets. This is attributed to the reduced market activity in January and February, reflecting fewer relocations during the cooler months. As the market transitions into the peak homebuying season in spring, there is a notable surge in activity, leading to a more significant increase in home prices. Subsequently, as fall and winter approach, prices continue to rise, albeit at a more moderate pace as activity tapers off once again.

In the current year, we observe the resurgence of seasonality. Let’s examine how this year aligns with the established long-term trend, as illustrated in the graph below:

Here’s the most recent data for the current year from the same source. As before, the dark bars represent the established trend, while the green bars depict this year’s developments. Notably, the green bars are starting to align more closely with the customary market patterns. This is a positive development, signifying a more sustainable pace of price growth compared to recent years.

In summary, on a national scale, prices are not decreasing; rather, the growth in prices is gradually returning to a more normalized trajectory. Looking ahead, there’s a possibility that the media might misinterpret this slowdown in home price growth as an actual decline in prices. It’s essential not to fully rely on headlines for accurate information. The provided data offers the necessary context to genuinely comprehend the situation. If you encounter confusing headlines, it’s advisable to consult with a trusted real estate professional for clarification.

It’s crucial to bear in mind that it’s customary for home price growth to decelerate as the year progresses. This doesn’t imply a decline in home prices; rather, it signifies a shift to a more moderate rate of increase.

Bottom Line

Home price appreciation is returning to normal seasonality and that’s a good thing. If you have questions about what’s happening with prices in our local area, let’s connect.