Don’t fall for the next shocking headlines about home prices

If you are thinking about buying or selling a house, one of your biggest questions is probably: What’s going on with home prices right now? It’s not surprising that you’re not clear on this topic. The headlines that are being used to talk about prices are comparing the current statistics with the past few years. You can’t compare the current year to those ‘unicorn years’ (when home prices hit unsustainable record highs). As prices are beginning to normalize, people are talking about it as if it’s bad and making people afraid of what’s coming next. The worst of the home price declines is already behind us. We’re now starting to see a return to more normal home prices. Let’s begin by discussing seasonality in the real estate market. The housing market has predictable ebbs, and flows each year. The spring is the busiest time of year for homebuyers. This activity is usually still high in the summer, but it begins to decline as the cooler months approach. Home prices are affected by seasonality, because they appreciate the most when there is high demand. That’s why before the recent abnormal years, we had a long-term trend of home prices. The graph below shows typical monthly home prices from 1973 to 2021 (not corrected, so you can clearly see the seasonality).:As shown by the data for the last 48-years, home prices are higher at the beginning of each year, but not nearly as much as in the spring and summer. This is because the market is quieter in January and February, when fewer people are moving. As the market transitions to the peak season for homebuying in the spring, the activity increases and home prices rise in response. As fall and winter approaches, activity begins to ease. Price growth slows but still usually appreciates. Why This is Important to Understand As the housing market moves into a more predictable rhythm, you will see more headlines that are either wrong or misleading. These headlines may use price terms like: Appreciation: when the prices increase.
Deceleration of appreciation : when prices continue their upward trend, but at a slower pace.
Depreciation is the decrease in price.
They’ll mistakenly think that prices are falling because of the seasonality of the market in the fall and winter. Do not let headlines scare you or confuse you. It’s normal to experience a slowing of home price growth as the months pass.

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