Robbinsville, new jersey
The Resurgence of Typical Seasonal Patterns in Home Price Growth
If you’re considering a move, you might be curious about the current state of home prices. Contrary to some media reports, home prices aren’t on the decline at a national level. Instead, what we’re seeing is a return to more typical, steady price growth. To gain a deeper understanding of this trend, here’s the essential context.
The housing market experiences consistent patterns throughout the year, known as seasonality. Spring marks the peak homebuying season, characterized by heightened market activity. Summer remains active but gradually decreases as the colder months approach. Home prices mirror this seasonality, with the most significant appreciation occurring when demand is highest.
This is why a consistent long-term trend exists in home prices. The graph below, based on data from Case-Shiller, illustrates the typical monthly fluctuations in home prices from 1973 to 2022 (unadjusted to highlight seasonality):
As depicted in the data, home prices tend to experience growth at the start of the year, although not as pronounced as during the spring and summer months when the market is most vibrant. The early months of January and February witness reduced market activity due to fewer relocations in the colder seasons. With the arrival of spring, the market enters its prime homebuying season, witnessing increased activity and more substantial price appreciation. As the year progresses towards fall and winter, the housing market cools once more, with price growth slowing down but typically still showing appreciation.
With the current increase in mortgage rates, the housing market is showing early signs of returning to its traditional seasonality, following a series of atypical ‘unicorn’ years. Selma Hepp, Chief Economist at CoreLogic, elaborates on this shift:
“Higher mortgage rates have decelerated the rapid price surges, bringing monthly increases back to typical seasonal norms. Essentially, while home prices continue to rise, they now align with historical seasonal patterns.”
"Why This Understanding Is Crucial"
“In the upcoming months, the media is expected to increase its coverage of home prices. During this reporting, you may encounter industry-specific terminology such as:”
- Appreciation: Refers to the increase in property prices.
- Deceleration of Appreciation: Signifies a slowdown in the rate of price growth, where prices continue to rise but at a more gradual pace.
- Depreciation: Indicates a decrease in property prices.
Don’t be perplexed by the terminology, and don’t let misleading headlines generate unnecessary concerns. The incredibly fast rate of home price growth observed in recent years was not sustainable and had to naturally slow down at some juncture. What we’re currently witnessing is a deceleration of appreciation, not a depreciation.
Keep in mind that it’s customary for home price growth to ease as the year progresses. This certainly doesn’t imply that home prices are declining; they’re simply increasing at a more restrained rate.
Bottom Line
Amidst sensational headlines causing uncertainty about home prices, the reality is straightforward. Home price appreciation is reverting to its typical seasonal pattern. If you seek clarity on price trends in your local area, feel free to reach out.
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