In today’s news, there might be uncertainty surrounding home prices, with concerns about whether the worst is yet to come. However, being cautious of the unnecessarily negative picture portrayed in current headlines is essential. When looking at the year-over-year view, it is true that home prices experienced a drop, but this is largely due to the comparison with an extraordinary year when prices peaked well above the norm.
To gain a more accurate perspective and avoid biased comparisons, it is crucial to analyze monthly data instead. Fortunately, the monthly data presents a significantly more positive story. Recent reports from three reliable sources show that the worst declines in home prices have already occurred, and there is a national appreciation in prices.
It’s important to note that local home price trends can still vary depending on the market, so it’s best to consider regional factors. Overall, however, the national data indicate a positive trajectory for home prices, easing concerns about further declines.
Analyzing the monthly view of the past year in the housing market, we observe two distinct phases. In the first half of 2022, home prices experienced a rapid and steady increase. However, from July onwards, prices began to decline (indicated by the red portions in the graphs). This downward trend stabilized around August or September. Nevertheless, the most recent data for early 2023 reveals a positive shift, as all three reports demonstrate that prices have been consistently rising for three or more consecutive months.
This upward trajectory in month-over-month data is an encouraging sign for the housing market, suggesting a national trend of increasing home prices. According to Craig J. Lazzara, the Managing Director at S&P Dow Jones Indices, the data for April further supports the argument that the decline in home prices, which started in June 2022, might have come to an end by January 2023.
Experts attribute the resilience of home prices, despite expectations of a crash, to the limited availability of homes for sale relative to the significant demand from potential buyers. The current mortgage rates, even though favorable, are not enough to match the high number of people interested in buying homes. This demand-supply imbalance exerts upward pressure on prices, preventing a severe decline in the housing market as some had anticipated. Mark Fleming, the Chief Economist at First American, explains this phenomenon and highlights the impact of demand outpacing supply on housing prices.
Doug Duncan, Senior VP, and Chief Economist at Fannie Mae, acknowledges that home price growth has surpassed expectations, primarily due to the robust demand in the housing market driven by demographic factors.
Here’s how this development can impact you:
For Buyers: If you were hesitant about purchasing a home, fearing a decline in its value, the rebound in home prices should bring you relief. Moreover, owning a home now presents an opportunity to invest in a property that typically appreciates over time, potentially benefiting you in the long run.
For Sellers: If you’ve been holding off on selling your house due to concerns about fluctuating home prices, it might be the right time to collaborate with a real estate agent and list your property. The latest data indicates a shift in favor of sellers, which means you may be able to fetch a favorable price for your home.
If you postponed your plans to move or invest in real estate due to worries about declining home prices, the most recent data suggests that the worst has already passed, and home prices are rising on a national level. To stay informed about the local housing market, consider partnering with a knowledgeable local real estate agent who can provide insights specific to your area.