Why Home Prices Keep Going Up

    If you've ever dreamed of buying your own place, or selling your current house to upgrade, you're no stranger to the rollercoaster of emotions changing home prices can stir up. It's a tale of financial goals, doubts, and a dash of anxiety that many have been through. But if you put off moving because you’re worried home prices might drop, make no mistake, they’re not going down. In fact, it's just the opposite. National data from several sources says they’ve been going up consistently this year (see graph below):       Here’s what this graph shows. In the first half of 2022, home prices rose significantly (the green bars on the left side of the graphs above). Those increases were dramatic and unsustainable. So, in the second half of the year, prices went through a correction and started dipping a bit (shown in red). But those slight declines were shallow and short-lived. Still, the media really focused on those drops in their headlines – and that created a lot of fear and uncertainty among consumers. But here’s what hasn’t been covered fully. So far in 2023, prices are going up once more, but this time at a more normal pace (the green bars on the right side of the graphs above). And after price gains that were too high and then the corrections that followed in 2022, the fact that all three reports show more normal or typical price appreciation this year is good news for the housing market. Orphe Divounguy, Senior Economist at Zillow, explains changing home prices over the past 12 months this way:  “The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. . . . That downturn has proven to be short lived as housing has rebounded impressively so far in 2023. . .” Looking ahead, home price appreciation typically starts to ease up this time of year. As that happens, there’s some risk the media will confuse slowing price growth (deceleration of appreciation) with home prices falling (depreciation). Don’t be fooled. Slower price growth is still growth. Why Are Home Prices Increasing Now? One reason why home prices are going back up is because there still aren't enough homes for sale for all the people who want to buy them. Even though higher mortgage rates cause buyer demand to moderate, they also cause the supply of available homes to go down. That’s because of the mortgage rate lock-in effect. When rates rise, some homeowners are reluctant to sell and lose their current low mortgage rate just to take on a higher one for their next home. So, with higher mortgage rates impacting both buyers and sellers, the supply and demand equation of the housing market has been affected. But since there are still more people who want to purchase homes than there are homes available to buy, prices continue to rise. As Freddie Mac states:  “While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase . . .” Here’s How This Impacts You Buyers: If you've been waiting to buy a home because you were afraid its value might drop, knowing that home prices have gone back up should make you feel better. Buying a home gives you a chance to own something that usually becomes more valuable over time. Sellers: If you've been holding off on selling your house because you were worried about how changing home prices would impact its value, it could be a smart move to work with a real estate agent and put your house on the market. You don't have to wait any longer because the most recent data indicates home prices have turned in your favor. Bottom Line If you put off moving because you were worried that home prices might go down, data shows they’re increasing across the country. Let’s connect so you can understand how home prices are changing in our local area.

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Home Prices Are Not Falling

      During the fourth quarter of last year, some housing experts projected home prices were going to crash in 2023. The media ran with those forecasts and put out headlines calling for doom and gloom in the housing market. All of this negative news coverage made a lot of people have doubts about the strength of the residential real estate market. If it made you question if you should delay your own plans to move, here’s what you really need to know. Home Prices Never Crashed Disregard what you saw in the headlines. The actual data shows home prices were remarkably resilient and performed far better than the media would have you believe (see graph below):     This graph uses reports from three trusted sources to clearly illustrate prices have already rebounded after experiencing only slight declines nationally. That’s a far cry from the crash so many articles called for. The declines that did happen (shown in red), weren’t drastic but were short-lived. As Nicole Friedman, a reporter at the Wall Street Journal (WSJ), says: “Home prices aren’t falling anymore. . . The surprisingly quick recovery suggests that the residential real-estate downturn is turning out to be shorter and shallower than many housing economists expected . . .” Even though some media coverage made a big deal about home prices pulling back, the slight correction that happened is already in the rearview mirror. Basically, this data shows you home prices aren’t falling anymore – they’re actually going back up. What’s Next for Home Prices? The consensus from experts is that home price growth will continue in the years ahead and is returning to normal levels for the market. That means we’ll still see home prices appreciating, just at a slower pace than the last few years – and that’s a good thing. Some news sources will see home price growth slowing and put out stories that make you think prices are falling again. The return of misleading headlines like those is already having an impact on how homebuyers are feeling again. You can see how this affects general opinion in the Consumer Confidence Survey from Fannie Mae (see graph below):        While the percentage of Americans who think prices will fall has been slowly declining this year, the latest Consumer Confidence data indicates that’s ticked back up recently (shown in red). This change is surprising especially since the home price data shows prices are going up, not down. It tells you the impact the media still has on public opinion. Don’t fall for the negative headlines and become part of this statistic. Remember, data from a number of sources shows home prices aren’t falling anymore. Bottom Line Even though the media may make things sound doom and gloom, the data shows home prices aren’t falling anymore. So, don’t let the headlines scare you or delay your plans. Let's connect so you have a trusted resource to cut through the noise and tell you what’s really happening in our area.

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The Return of Normal Seasonality for Home Price Appreciation

    If you’re thinking of making a move, one of the biggest questions you have right now is probably: what’s happening with home prices? Despite what you may be hearing in the news, nationally, home prices aren’t falling. It’s just that price growth is beginning to normalize. Here’s the context you need to really understand that trend. In the housing market, there are predictable ebbs and flows that happen each year. It’s called seasonality. Spring is the peak homebuying season when the market is most active. That activity is typically still strong in the summer but begins to wane as the cooler months approach. Home prices follow along with seasonality because prices appreciate most when something is in high demand. That’s why there’s a reliable long-term home price trend. The graph below uses data from Case-Shiller to show typical monthly home price movement from 1973 through 2022 (not adjusted, so you can see the seasonality):   As the data shows, at the beginning of the year, home prices grow, but not as much as they do in the spring and summer markets. That’s because the market is less active in January and February since fewer people move in the cooler months. As the market transitions into the peak homebuying season in the spring, activity ramps up, and home prices go up a lot more in response. Then, as fall and winter approach, activity eases again. Price growth slows, but still typically appreciates. After several unusual ‘unicorn’ years, today’s higher mortgage rates helped usher in the first signs of the return of seasonality. As Selma Hepp, Chief Economist at CoreLogic, explains: “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 Is So Important to Understand 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. Don’t let the terminology confuse you or let any misleading headlines cause any unnecessary fear. The rapid pace of home price growth the market saw in recent years was unsustainable. It had to slow down at some point and that’s what we’re starting to see – 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.

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