Decoding Home Price Headlines: Stay Informed, Stay Confident

Based on the news reports you've been seeing, you might be concerned about a decline in home prices. However, the headlines might not be giving you the complete picture.

When we analyze the national data for 2023, it reveals that home prices actually experienced positive growth throughout the year. While this trend varies across different markets, and there were occasional months with minor declines on a national scale, these instances were more of an anomaly rather than the norm.

Overall, the prevailing narrative is one of an increase in prices during the past year, rather than a decrease. Let's delve into the data to clarify the situation.

2023 Saw a Return to Typical Home Price Growth

If anything, last year represented a return to more typical home price appreciation trends. In the realm of residential real estate, there are predictable fluctuations that occur annually, known as seasonality. Here's how it typically unfolds:

During spring, which marks the peak homebuying season, the market experiences heightened activity. This vigor typically continues into the summer months but begins to taper off as the year progresses. Correspondingly, home prices tend to follow this seasonal pattern, with the most significant growth occurring when demand is high.

The graph below, utilizing Case-Shiller data spanning from 1973 to 2022 (without adjustment), illustrates how this seasonal pattern has historically influenced home prices:

As the graph shows, moving through the year in 2023, the level of appreciation fell more in line with the long-term trend for what usually happens in the housing market. You can see that in how close the green bars come to matching the blue bars in the later part of the year.

But the headlines only really focused on the two bars outlined in red. Here’s the context you may not have gotten that can really put those two bars into perspective. The long-term trend shows it’s normal for home prices to moderate in the fall and winter. That’s typical seasonality.

And since the 49-year average is so close to zero during those months (0.10%), that also means it’s not unusual for home prices to drop ever so slightly during those times. But those are just blips on the radar. If you look at the year as a whole, home prices still rose overall.

What You Really Need To Know

Headlines are going to call attention to the small month-to-month dips instead of the bigger year-long picture. And that can be a bit misleading because it’s only focused on one part of the whole story.

Instead, remember last year we saw the return of seasonality in the housing market – and that’s a good thing after home prices skyrocketed unsustainably during the ‘unicorn’ years of the pandemic.

And just in case you’re still worried home prices will fall, don’t be. The expectation for this year is that prices will continue to appreciate as buyers re-enter the market due to mortgage rates trending down compared to last year. As buyer demand goes up and more people move at the same time the supply of homes for sale is still low, the upward pressure on prices will continue.

Bottom Line

Don’t let home price headlines confuse you. The data shows that, as a whole, home prices rose in 2023. If you have questions about what you’re hearing in the news or about what’s happening with home prices in our local area, let’s connect.

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