If you're in the market to buy or sell a home, you're likely wondering about one major thing: what's going on with home prices? And it's totally understandable that you're not getting a clear answer on that. The way the news is reporting on prices is making things confusing.

These folks are saying all this negative stuff, right? Well, they're looking at the current stats and comparing them to the crazy high prices we had a few years back. But c'mon, you can't compare this year to those "unicorn" years when prices were sky-high but totally unsustainable. And now that prices are evening out, these naysayers are making it sound like a horrible thing, scaring people about what's gonna happen next. But guess what? The biggest drops in home prices are already in the past. What we're seeing now is a return to more normal appreciation in home prices.

Let's break down home price trends in a way that's easier to grasp. We'll zoom in on what's considered typical for the market and set aside the last few years since they were a bit out of the ordinary. Sound good?

Let's dive into the concept of seasonality in the real estate world. You know, in the housing market, there are times when things are bustling and times when they aren't. Spring is the prime time for buying a home; it's when the market is buzzing with activity. Summer is also pretty lively, but as the weather cools down, so does the market. And get this, those home prices, they actually go along with the seasons too! When there's high demand for houses, prices tend to go up. It's all about supply and demand, my friend!

Before all the craziness we just went through, there was a consistent trend in home prices over the long run. The graph below, which is based on data from Case-Shiller, gives you an idea of how home prices usually change each month from 1973 to 2021. Keep in mind that the data isn't adjusted for seasonal variations, so you can see the natural ups and downs throughout the years.

According to the data collected over the past 48 years, a notable trend has been observed in the real estate market: home prices tend to experience growth at the start of the year, although not as significant as during the spring and summer seasons. This pattern can be attributed to the decrease in market activity during January and February, as fewer individuals opt to move amidst the cooler months.
As the real estate market transitions into the peak homebuying season in the spring, we witness a significant increase in activity. This surge in demand results in a more pronounced rise in home prices, as buyers are actively seeking properties. The combination of heightened interest and limited inventory creates a market environment that drives up prices to a greater extent.

However, as autumn and winter approach, there is a tendency for market activity to ease once again. This gradual decline in demand has a moderating effect on price growth. Although home prices continue to appreciate during these seasons, the rate of appreciation tends to be slower than during the spring and summer months.

The underlying factors leading to these trends are multifaceted. The cooler months often deter potential buyers from engaging in the homebuying process due to weather-related concerns and other personal considerations. The start of the year marks a time of planning for many individuals, and they may eventually act on their intentions as the weather improves and the housing market gains momentum.
Conversely, the spring and summer seasons bring a flurry of activity as more people feel inclined to explore and purchase homes. The more favorable weather, coupled with increased job opportunities and educational transitions, contribute to the surge in interest.

In summary, the data from the last 48 years consistently supports the observation that home prices experience growth at the beginning of the year, but the magnitude of this growth is surpassed during the spring and summer markets. With the onset of fall and winter, activity eases, resulting in slower price appreciation. Overall, this cyclic pattern provides valuable insights for both buyers and sellers, allowing them to make informed decisions based on historical market trends.

Why This Is So Important to Understand

As we head into the upcoming months, you'll start noticing more news articles about the housing market. Some of these headlines might not accurately represent what's really going on with home prices, or they might be a little tricky to interpret. They could throw around different terms when talking about prices, such as:

• Appreciation: which is basically when prices go up. It's like when the value of something, like a house or property, increases over time. So, when we say "appreciation," we're talking about an increase in value. Pretty cool, right?

• Deceleration of appreciation: when the prices of properties keep going up, but at a slower or more moderate rate. So, even though there's still an increase in value, it's not as fast as before.

• Depreciation: when prices take a dip and decrease. So, instead of things getting more expensive, they start to lose their value. Kind of a bummer, huh? But hey, that's how it goes sometimes in the world of economics!

During the fall and winter, home prices tend to grow at a slower rate compared to other seasons. But some folks might misinterpret this natural slowdown and think that prices are actually dropping. Don't let those scary headlines or rumors freak you out! It's totally normal to witness a deceleration in home price growth as the months go by. It's just the way things work in the market. So take a deep breath and don't let fear get the best of you!

Bottom Line

If you're curious about what's going on with home prices in your area, just reach out to a reliable real estate agent. They'll be able to answer all your questions and fill you in on the latest updates.