If you’re feeling a bit muddy on what’s happening with home prices, that’s 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 it’s also coming from some media coverage misrepresenting what the data really shows.

So, to keep things simple, here’s 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. It’s 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. That’s why there’s a reliable long-term home price trend. The graph below uses data from Case-Shiller to show the typical percent change for monthly home price movement from 1973 through 2022 (not adjusted, 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. That’s 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, let’s look at how this year compares to that long-term trend (see graph below):

Here’s 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 what’s happened this year. As you can see, the green bars are beginning to fall in line with what’s normal for the market. That’s a good thing because it’s more sustainable price growth than we’ve seen in recent years.

In a nutshell, nationally prices aren’t falling, it’s just that price growth is beginning to normalize. Moving forward, there’s a chance the media will misrepresent this slowing of home price growth as prices falling. So don’t believe everything you see in the headlines. The data included here gives you the context you need to really understand what’s happening. So, if you see something in the headlines that’s confusing, don’t just take it at face value. Ask a trusted real estate professional for more information.

Remember, it’s normal to see home price growth slow down as the year goes on. And that definitely doesn’t mean home prices are falling. They’re just rising at a more moderate pace.

Bottom Line

Home price appreciation is returning to normal seasonality and that’s a good thing. If you have questions about what’s happening with prices in your local area, connect with a real estate professional.

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Some Highlights

• If you’re wondering what’s happening with home prices, know they’re still rising, just at a slower pace – and that’s perfectly normal for this time of year.  
• Based on typical seasonality in the market, prices go up most in the spring during the peak buying season, and then price growth slows down as the year goes on.
• Home prices aren’t falling. They’re just rising slower and going back to normal seasonal trends. That’s a good thing. If you’re curious about prices in your area, reach out to a real estate agent for answers.

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If you’re thinking of making a move, one of the biggest questions you have right now is probably: what’s happening with home prices? Despite what you may be hearing in the news, nationally, home prices aren’t falling. It’s just that price growth is beginning to normalize. Here’s the context you need to really understand that trend.

In the housing market, there are predictable ebbs and flows that happen each year. It’s 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.

That’s why there’s a reliable long-term home price trend. The graph below uses data from Case-Shiller to show typical monthly home price movement from 1973 through 2022 (not adjusted, 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 in the spring and summer markets. That’s 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, activity eases again. Price growth slows, but still typically appreciates.

After several unusual ‘unicorn’ years, today’s higher mortgage rates helped usher in the first signs of the return of seasonality. As Selma Hepp, Chief Economist at CoreLogic, explains:

“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.”

Why This Is So Important to Understand

In the coming months, you’re going to see the media talk more about home prices. In their coverage, you’ll likely see industry terms like these:

• Appreciation: when prices increase.
• Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
• Depreciation: when prices decrease.

Don’t let the terminology confuse you or let any misleading headlines cause any unnecessary fear. The rapid pace of home price growth the market saw in recent years was unsustainable. It had to slow down at some point and that’s what we’re starting to see – deceleration of appreciation, not depreciation. 

Remember, it’s normal to see home price growth slow down as the year goes on. And that definitely doesn’t mean home prices are falling. They’re just rising at a more moderate pace.

Bottom Line

While the headlines are generating fear and confusion on what’s happening with home prices, the truth is simple. Home price appreciation is returning to normal seasonality. If you have questions about what’s happening with prices in your local area, connect with a real estate professional.

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Wondering if it still makes sense to sell your house right now? The short answer is, yes. Especially if you consider how few homes there are for sale today.

You may have heard inventory is low right now, but you may not fully realize just how low or why that’s a perk when you go to sell your house. This graph from Calculated Risk can help put that into perspective: 

As the graph shows, while housing inventory did grow slightly week-over-week (shown in the blue bar), overall supply is still low (shown in the red bars). Compared to the same week last year, supply is down roughly 10% – and it was already considered low at that time. But, if you look further back, you’ll see inventory is down even more significantly.

To gauge just how far off from normal today’s inventory is, let’s compare right now to 2019 (the last normal year in the market). When you compare the same week this year with the matching week in 2019, supply is about 50% lower. That means there are half the homes for sale now than there’d usually be.

The key takeaway? We’re still nowhere near what’s considered a balanced market. There’s plenty of demand for your house because there just aren’t enough homes to go around. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:

“There are simply not enough homes for sale. The market can easily absorb a doubling of inventory.”

So, if you want to list your house, know that there’s only about half the inventory there’d usually be in a more normal year. That means your house will be in the spotlight if you sell now and you may see multiple offers and a fast home sale. 

Bottom Line

With the number of homes for sale roughly half of what there’d usually be in a more normal year, you can rest assured there’s demand for your house. If you want to sell, connect with a local real estate agent now so your house can shine above the rest while inventory is so low.

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Before you decide to sell your house, it’s important to know what you can expect in the current housing market. One positive trend right now is homebuyers are adapting to today’s mortgage rates and getting used to them as the new normal.

To better understand what’s been happening with mortgage rates lately, the graph below shows the trend for the 30-year fixed mortgage rate from Freddie Mac since last October. As you can see, rates have been between 6% and 7% pretty consistently for the past nine months:

According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), mortgage rates play a significant role in buyer demand and, by extension, home sales. Yun highlights the positive impact of stable rates:

“Mortgage rates heavily influence the direction of home sales. Relatively steady rates have led to several consecutive months of consistent home sales.”

As a seller, hearing that home sales are consistent right now is good news. It means buyers are out there and actively purchasing homes. Here’s a bit more context on how mortgage rates have impacted demand recently.

When mortgage rates surged dramatically last year, escalating from roughly 3% to 7%, many potential buyers felt a bit of sticker shock and decided to hold off on their plans to purchase a home. However, as time has passed, that initial shock has worn off. Buyers have grown more accustomed to current mortgage rates and have accepted that the record-low rates of the last few years are behind us. As Doug Duncan, SVP and Chief Economist at Fannie Mae, says:

“. . . consumers are adapting to the idea that higher mortgage rates will likely stick around for the foreseeable future.”

In fact, a recent survey by Freddie Mac reveals 18% of respondents say they’re likely to buy a home in the next six months. That means nearly one out of every five people surveyed plan to buy in the near future. And that goes to show buyers are planning to be active in the months ahead.

Of course, mortgage rates aren’t the sole factor affecting buyer demand. No matter where mortgage rates stand, people will always have reasons to move, whether it’s for job relocation, changing households, or any other personal motivation. As a seller, you can feel confident there is a market for your house today. And that demand is pretty strong as buyers settle into where rates are right now. 

Bottom Line

The way buyers perceive today’s mortgage rates is shifting – they’re getting used to the new normal. Steady rates are contributing to strong buyer demand and consistent home sales. Connect with a local real estate agent to get your house on the market and in front of those buyers.

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