Understanding the Resurgence of Seasonal Home Price Growth

Embarking on a real estate journey? A prevalent question in your mind might be regarding the trajectory of home prices. Amidst the barrage of news headlines, it's crucial to understand that home prices aren't tumbling down; they are merely reflecting the typical seasonal growth patterns. Let's delve deeper.

Deciphering Seasonality in the Housing Market

Every year, the real estate market showcases a seasonal rhythm, aptly named 'seasonality'. The zenith of homebuying frenzy typically falls in spring, sustained through summer, before receding with the advent of cooler months. With demand being the rudder steering price trends, home prices usually experience a boost during peak buying times.

A glance at the long-standing home price trends, illustrated below using Case-Shiller data from 1973-2022, lays bare the seasonality effect:

As discerned from the graph, the early months see moderate price augmentation, reflective of the muted market activity in the colder days. However, as spring heralds the high buying season, prices witness a significant uplift, receding gradually with the onset of autumn and winter.

Today, the market is showcasing a shift back to this natural rhythm, especially after a few anomalous years, with higher mortgage rates acting as the catalyst. Selma Hepp, CoreLogic's Chief Economist, shares insights:

“The ascendancy of mortgage rates has subdued extreme price leaps, aligning monthly augmentations with historical seasonal norms. This signifies home prices are still on the uptrend, albeit in tandem with time-tested seasonal patterns.”

Why Unraveling This Is Crucial

The media will likely amplify discussions around home prices, interspersing terms like:

• Appreciation: An increase in prices.
• Deceleration of appreciation: Prices increasing, but at a gentler rate.
• Depreciation: A decrease in prices.

It's imperative not to let jargon or sensationalist headlines cloud understanding. The brisk pace of home price appreciation witnessed recently was an anomaly and was bound to ease off. What we observe now is a deceleration in appreciation, not an actual decrease.

It’s quintessential to comprehend that a reduction in the speed of home price growth during the year is customary. This doesn't spell a reduction in prices; rather, it signifies a more balanced appreciation rate.

Bottom Line

Don't let dramatic headlines muddle your understanding of the real estate market. The essence is straightforward: Home price growth is reverting to its standard seasonal pattern. Curious about localized price trends? Reach out, and let's unravel them together.

10-2-2023