Exploring Home Prices Rapid Surge And Return To A More Sustainable Pattern.

If you're considering moving into the real estate market, you've likely been following the headlines and wondering what's happening with home prices. Despite the sensationalism in the news, it's important to understand that national home prices aren't plummeting; they are entering a normalization phase. In this article, we will delve into the concept of seasonality in the housing market, decipher the current trends, and provide you with the context you need to navigate this exciting journey.

Understanding Seasonality in Real Estate

In the world of real estate, there are predictable ebbs and flows, and this phenomenon is known as seasonality. Spring marks the peak homebuying season when the market is at its most vibrant and active. The summer months typically maintain strong activity levels, but the market starts to ease as the cooler months approach. Home prices closely follow this pattern because they appreciate the most when demand is high.

A glance at the graph below, utilizing data from Case-Shiller spanning from 1973 through 2022, reveals the typical monthly movement in home prices (not adjusted for a clear view of seasonality):

As the data illustrates, at the beginning of the year, home prices do grow, but less significantly than they do during the spring and summer. This is because January and February are typically less active months in the real estate market, with fewer people choosing to move during the colder season. However, as we transition into the peak homebuying season in spring, the market becomes more active, and home prices respond with more pronounced increases. Then, with the arrival of fall and winter, activity slows down, and while price growth decelerates, it still generally appreciates.

Understanding the intricacies of seasonality is pivotal to making informed decisions in the real estate market. It means recognizing that the fluctuations in home prices throughout the year are not cause for alarm but rather a natural part of the market's rhythm. These patterns allow buyers and sellers to strategically plan their moves, aligning with the seasons that best suit their needs. It's not about prices falling; it's about understanding when they rise more and when they rise less.

The Impact of Mortgage Rates

We have experienced several unusual 'unicorn' years in the real estate market. However, the tide is turning, and one significant factor influencing this shift is higher mortgage rates. Selma Hepp, Chief Economist at CoreLogic, explains this phenomenon: 

“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.”

These higher mortgage rates have had a calming effect on the real estate market. They've acted as a natural check on the rapid price surges we witnessed in the past. While it's true that these surges were exciting for sellers, they could have been more sustainable in the long run. The return to historic seasonal averages in price growth is a welcome development, providing a healthier and more balanced real estate environment.

Why This Matters

In the months ahead, you can expect media coverage to focus more on home prices, using terms like "appreciation," "deceleration of appreciation," and even "depreciation." It's crucial not to let the terminology confuse you or let misleading headlines breed unnecessary fear. The breakneck pace of home price growth observed in recent years was simply unsustainable, and a slowdown was inevitable. What we are now witnessing is a deceleration of appreciation, not depreciation.

Remember, it's perfectly normal for home price growth to moderate as the year progresses. This moderation doesn't signal falling home prices; rather, it indicates that prices are rising more sustainably and predictably. This predictability benefits buyers and sellers, allowing for better planning and decision-making in the real estate market.

In Conclusion

While headlines may generate fear and confusion about the state of home prices, the reality is straightforward: home price appreciation is returning to normal seasonality. If you have questions or want to understand how these trends apply to your local area, please don't hesitate to connect with us. We're here to help you navigate the ever-evolving real estate market and find your perfect home.

Take advantage of the opportunity to make informed decisions about your real estate journey. Reach out to our dedicated real estate team with any questions, and let us assist you in Finding Your Perfect Home.