The Return of Normal Seasonality for Home Price Appreciation

The Return of Normal Seasonality for Home Price Appreciation

The Return of Normal Seasonality for Home Price Appreciation

If you're considering making a move in the real estate market, one of your top questions right now is likely: what's happening with home prices? Contrary to some sensationalized news reports, national home prices are not plummeting. Instead, we are witnessing a return to more normalized price growth patterns. To grasp this trend fully, let's explore the context behind it.

Understanding Seasonality in the Housing Market

The housing market experiences predictable ebbs and flows throughout the year, commonly referred to as seasonality. Spring typically marks the peak homebuying season when the market is most active. This activity remains robust throughout the summer but gradually slows down as the cooler months approach. Home prices closely follow this seasonality because prices tend to appreciate the most when there is high demand.

This trend aligns with the long-term historical pattern of home prices. To illustrate, let's examine a graph based on Case-Shiller data, which tracks monthly home price movements from 1973 to 2022 (not adjusted for seasonality):

As the data reveals, home prices typically experience growth at the beginning of the year, albeit not as substantial as during the spring and summer months. This is due to reduced market activity in January and February, as fewer people tend to move during the colder months. When the market transitions into the peak homebuying season in the spring, activity surges, leading to a more significant increase in home prices. As fall and winter approach, activity gradually subsides, and while price growth slows, it generally continues to appreciate.

Factors Contributing to Seasonal Trends

After several atypical 'unicorn' years, the return to seasonality has become more apparent, primarily influenced by higher mortgage rates. Selma Hepp, Chief Economist at CoreLogic, provides valuable insights:

"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 Understanding Seasonality Is Crucial

In the upcoming months, you'll come across numerous media discussions about home prices. These discussions may introduce industry-specific terms, such as:

Appreciation: Referring to price increases.
Deceleration of Appreciation: Signifying that prices are still rising but at a slower or more moderate pace.
Depreciation: Indicating a decrease in prices.

It's important not to be bewildered by these terms or misled by sensational headlines. The rapid price growth observed in recent years was unsustainable and was destined to moderate. What we are currently witnessing is a deceleration of appreciation, not depreciation.

Remember, it's normal for home price growth to slow down as the year progresses. This does not imply that home prices are plummeting; they are simply rising at a more gradual pace.

In Conclusion

Amidst the headlines generating fear and confusion regarding home prices, the reality is straightforward. Home price appreciation is reverting to normal seasonality. If you have inquiries about price trends in your local area, don't hesitate to reach out to us. We are here to help you navigate the ever-changing real estate market with confidence.

Let’s Talk

You’ve got questions and we can’t wait to answer them.

Follow Us on Instagram