What's Going on with Home Prices?
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One of the biggest questions people are asking right now is: What is going on with home prices? There are headlines about ongoing price appreciation, but at the same time, some sellers are reducing the price of their homes. That can feel confusing and makes it more difficult to get a clear picture.
Part of the challenge is that it can be hard to understand what experts are saying when the words they use sound similar. Let’s break down the differences among those terms to help clarify what’s actually happening today.
- Appreciation is when home prices increase.
- Depreciation is when home prices decrease.
- Deceleration is when home prices continue to appreciate, but at a slower or more moderate pace.
Experts agree that, nationally, what we’re seeing today is deceleration. That means home prices are appreciating, just not at the record-breaking pace they have over the past year. In 2021, data from CoreLogic tells us home prices appreciated by an average of 15% nationwide. And earlier this year, that appreciation was almost 20%. This year, experts forecast home prices will appreciate at a decelerated pace of around 10 to 11% (on average).
The graph below uses the latest data from CoreLogic to help tell the story of how home prices are decelerating, but not depreciating so far this year.
As the green bars show, home prices appreciated between 19-20% year-over-year from January to March of 2022. But over the last few months, the pace of that appreciation has decelerated to 18%. This means price growth is still climbing compared to last year but at a slower rate.
The median home sales price has jumped every month this year, reaching a record high of $413,800 in June 2022 before dipping to $403,800 in July 2022, according to the National Association of Realtors.
The Monthly Mortgage Monitor from Black Knight explains:
“Annual home price growth dropped by nearly two percentage points . . .the greatest single-month slowdown on record since at least the early 1970s. . .While June’s slowdown was record-breaking, home price growth would need to decelerate at this pace for six more months to drive annual appreciation back to 5%, a rate more in line with long-run averages."
Basically, this means, home prices are still far above the norm, and we’d have to see a lot more deceleration to even fall in line with more typical rates of home price growth. That’s still not home price depreciation.
The big takeaway is home prices haven’t fallen or depreciated nationwide, they’re just decelerating or moderating. While some unique and overheated markets around the U.S. may see declines, nationally, home prices are forecast to appreciate.
And when we look at the country as a whole, all of the experts are projecting ongoing appreciation in regards to home prices, as well as rising inventory levels which provides more options to home buyers who are actively looking.