Understanding the Return of Seasonality in Home Price Appreciation

If you're contemplating a move, you're probably wondering about the current state of home prices. Contrary to what you might hear in the news, national home prices are not plummeting; instead, they are beginning to exhibit a more normalized pattern of growth. To grasp this trend fully, here's some context you need to know.

In the housing market, there are predictable ebbs and flows that occur each year, known as seasonality. Spring marks the peak homebuying season when the market is most active, with the activity remaining robust throughout the summer and gradually tapering off as the cooler months approach. Home prices closely follow this seasonality because they appreciate the most when demand is high.

Consequently, a reliable long-term home price trend emerges. At the beginning of the year, home prices experienced growth, though not as pronounced as during the spring and summer markets due to reduced activity in January and February. As the market transitions into the peak homebuying season in the spring, activity surges, leading to more substantial price increases. As fall and winter approach, activity subsides once more, resulting in slower price growth, though it typically continues to appreciate.

After a series of exceptional years, characterized as 'unicorn' years, today's higher mortgage rates have played a role in heralding the return of seasonality. As Selma Hepp, Chief Economist at CoreLogic, explains:

"High mortgage rates have tempered 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 Understanding Matters

In the coming months, you can expect to see more media coverage on home prices. Within these reports, you'll likely encounter industry terms like:

  • Appreciation: indicating when prices increase.
  • Deceleration of appreciation: signifying continued price appreciation but at a slower, more moderate pace.
  • Depreciation: implying a decrease in prices.

Don't let these terminologies confuse you, and do not be swayed by misleading headlines that may stoke unnecessary fears. The rapid pace of home price growth witnessed in recent years was unsustainable and was bound to slow down eventually. What we are now witnessing is not depreciation but rather a deceleration of appreciation.

Remember, it is entirely normal for home price growth to ease as the year progresses. Importantly, this does not signify a decline in home prices; rather, it denotes that prices are rising at a more moderate pace.

In Conclusion

Amidst headlines that may generate fear and confusion regarding the state of home prices, the reality is straightforward. Home price appreciation is returning to a pattern of normal seasonality. If you have questions about local price trends in your area, please don't hesitate to reach out and connect with us.

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