When considering a real estate move, you likely have a pressing question: What's the current status of home prices? Despite the media buzz, it's essential to note that on a national scale, home prices are not experiencing a decline. Rather, what we're observing is a return to more typical price growth patterns. To gain a comprehensive understanding of this trend, it's crucial to delve into the context.

In the realm of real estate, there exist recurrent patterns known as seasonality, encompassing predictable ebbs and flows throughout the year. Spring stands out as the peak homebuying season when the market is exceptionally active. This momentum typically carries into the summer months but gradually subsides as the cooler seasons draw near. Home prices closely align with these seasonal shifts, as prices tend to appreciate most when there's a high demand for properties.

That’s why there’s a reliable long-term home price trend. The graph below uses data from MLS to show typical monthly home price movement from 2019 through 2023 (not adjusted, so you can see the seasonality):

As the data illustrates, home prices exhibit growth at the start of the year, although this increase is not as substantial as what is observed during the spring and summer markets. This phenomenon can be attributed to the decreased market activity experienced in January and February, as fewer individuals tend to relocate during the cooler months. As the real estate market transitions into the peak homebuying season in spring, there is a noticeable surge in activity, resulting in a more pronounced upward trajectory in home prices. Subsequently, with the onset of fall and winter, the level of activity gradually recedes. While price growth decelerates during this period, it generally maintains an appreciating trend.

Following a series of atypical 'unicorn' years, the current uptick in mortgage rates has played a pivotal role in reintroducing the initial indications of seasonality's resurgence. As articulated by Selma Hepp, Chief Economist at CoreLogic:

“High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.”

Why This Understanding Matters

In the coming months, you’re going to see the media talk more about home prices. In their coverage, you’ll likely see industry terms like these:

• Appreciation: when prices increase.

• Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.

• Depreciation: when prices decrease.

It's vital not to become perplexed by these terms or be unnerved by misleading headlines. The breakneck speed at which home prices surged in recent years was unsustainable and had to normalize at some point. This is precisely what we're witnessing now – a deceleration of appreciation, not depreciation.

Remember, it’s normal to see home price growth slow down as the year goes on. And that definitely doesn’t mean home prices are falling. They’re just rising at a more moderate pace.

Bottom Line

While the headlines are generating fear and confusion on what’s happening with home prices, the truth is simple. Home price appreciation is returning to normal seasonality. If you have questions about what’s happening with prices in our local area, let’s connect