Don't Be Fooled by Sensational Headlines About Home Prices
If you're currently in the market to buy or sell a home, you might be feeling uncertain about the state of home prices. The media often contributes to this confusion by comparing current statistics to the abnormally high prices experienced during the 'unicorn' years, which were ultimately unsustainable. As a result, they portray the current market normalization as a negative development, instilling fear and uncertainty among buyers and sellers.
However, it's crucial to remember that the worst home price declines are already behind us. The market is now returning to a more typical pattern of home price appreciation. To better understand this trend, let's focus on the market's seasonal patterns and omit the anomalous years.
In real estate, there are predictable ebbs and flows that occur each year. Spring is traditionally the peak homebuying season, characterized by high market activity and robust demand. As summer approaches, the market remains active but begins to gradually slow down. This seasonal pattern impacts home prices since they tend to appreciate the most when demand is at its highest.
Before the recent abnormal years, there was a reliable long-term home price trend. By examining data from Case-Shiller spanning from 1973 through 2021, we can observe this typical monthly home price movement (not adjusted, revealing the seasonality).
The graph illustrates that at the beginning of the year, home prices experience some growth, but not as much as during the spring and summer markets when demand is at its peak. As the housing market transitions into the peak homebuying season, activity intensifies, leading to more significant price appreciation. However, as the fall and winter approach, activity eases, and price growth slows down, though it still typically remains positive.
It's essential to grasp this seasonal rhythm because in the coming months, you may encounter more headlines that misinterpret or misrepresent what's truly happening with home prices. The media might use various price-related terms, such as:
1. Appreciation: Referring to price increases.
2. Deceleration of appreciation: Signifying that prices continue to rise, but at a slower or more moderate pace.
3. Depreciation: Indicating price decreases.
You may find headlines wrongly associating the seasonal slowdown in home price growth (deceleration of appreciation) with falling prices (depreciation). It's crucial not to be misled or alarmed by such headlines. Instead, remember that a deceleration of appreciation is a typical aspect of market seasonality in the fall and winter.
In conclusion, if you have questions or concerns about home prices in your area, it's best to seek advice and guidance from a trusted real estate professional. They can provide accurate and up-to-date information to help you navigate the market with confidence.