If youre feeling a bit muddy on whats happening with home prices, thats no surprise. Some people are still saying prices are falling, even though data proves otherwise. Part of that misconception is because people are getting their information from unreliable sources. But its also coming from some media coverage misrepresenting what the data really shows.
So, to keep things simple, heres what you really need to know using real data you can trust.
Normal Home Price Seasonality Explained
In the housing market, there are predictable ebbs and flows that happen each year. Its 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. Thats why theres a reliable long-term home price trend. The graph below uses data fromCase-Shillerto show the typical percent change for monthly home price movement from 1973 through 2022 (notadjusted, 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 when entering the spring and summer markets. Thats 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, prices still grow, just at a slower pace as activity eases again.
This Year, Seasonality Has Returned
Now, lets look at how this year compares to that long-term trend (see graph below):
Heres the latest data for this year from that same source. Just like before, the dark bars are the long-standing trend. The green bars represent whats happened this year. As you can see, the green bars are beginning to fall in line with whats normal for the market. Thats a good thing because its more sustainable price growth than weve seen in recent years.
In a nutshell, nationally prices arent falling, its just that price growth is beginning to normalize. Moving forward, theres a chance the media will misrepresent this slowing of home price growth as prices falling. So dont believe everything you see in the headlines. The data included here gives you the context you need to really understand whats happening. So, if you see something in the headlines thats confusing, dont just take it at face value. Ask a trusted real estate professional for more information.
Remember, its normal to see home price growth slow down as the year goes on. And that definitely doesnt mean home prices are falling. Theyre just rising at a more moderate pace.
Bottom Line
Home price appreciation is returning to normal seasonality and thats a good thing. If you have questions about whats happening with prices in your local area, connect with a real estate professional.
