The return of normal seasonality for home price appreciation
If you’re considering moving, one of your biggest concerns is probably the current state of home prices. Despite what the media may have you believe, home prices in general are not falling. Just that the price growth is starting to normalize. You need to know the context in order to understand this trend. In the housing market, the ebbs are predictable and occur every year. It’s called seasonality. The spring is the busiest season for homebuyers. This activity is still high in the summer, but it begins to decline as the cooler months approach. Home prices are influenced by seasonality, because they appreciate when there is high demand. This is why the long-term trend in home prices is reliable. The graph below shows typical monthly home prices from 1973 to 2022 (not corrected, so you can see seasonality). 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 slow down. Price growth slows but still usually appreciates. After several unusual “unicorn” years, today’s high mortgage rates helped usher back seasonality. Selma Hepp explains that high mortgage rates have slowed further price surges. Monthly increases are now returning to the regular seasonal averages. Home prices are still increasing, but they are in line with historical seasonal expectations. You’ll see terms like appreciation and price increase in their coverage.
Deceleration of appreciation : when prices continue their upward trend, but at a slower pace.
Depreciation is the decrease in price.
Do not let misleading headlines or terminology confuse you. The rapid growth in home prices that the market experienced in recent years could not be sustained. It had to slow at some point, and that’s exactly what we’re seeing – a deceleration in appreciation, not a depreciation. Remember that it’s normal for home price growth to slow down over the course of a year. This does not mean that home prices are dropping. They’re simply rising at a slower pace. Bottom LineWhile headlines are causing confusion and fear about what’s going on with home prices, there’s nothing to worry about. Home prices are returning to their normal seasonality. Connect with a real-estate professional if you have any questions about the current state of prices in your area.
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