One of the biggest questions people are asking right now is: what’s happening 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.

The market is normalizing, the past 2 years has been a frenzy and we could not sustain.  Interest rates were historically low and this allowed a lot more buyers to get into the market.  Then also made for a very competitive market because we were low on inventory and this led to buyers fighting over the same property.   We had extra high buyer demand because interest rates were so low that it allowed buyers to afford more house.  It became “the norm”  that buyers were having to pay above appraised value or even waiving appraisals so now the market is getting back to normal.  There was High demand and low supply.
Fast forward to the current market conditions-
We have had a lot of added inventory this past month, like 3 times the amount.  A couple of months ago we had 1 month of inventory and we now have 4.4 months of inventory.  That’s huge!!  They forecast some month over month declines but no year over year declines.
As we know it’s all about supply and demand and that is what determines values in most markets.
We have more added supply so some sellers are selling now to cash in on their equity and want to sell for a higher amount now before the neighborhood comps start to dwindle.
Now we will factor in increased interest rates that are about 6.25% currently (still overall “average” over a 20 year timeline, but they did increase fast) and that effects buyers affordability and lowers our pool of buyers.  So now we have higher rates and higher mortgages and less buyers and more to added inventory of houses on the market that allows buyers to have more to choose from.  Now it’s lower demand and higher supply.
It is still overall a seller’s market but days on the market are at an average of 27 days right now and there have been more price reductions as you know.
We are seeing properties last longer on the market and more price reductions because buyers are able to be pickier now.

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 upward of 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.

What’s Actually Happening with Home Prices Today? | MyKCM

As the green bars show, home prices appreciated between 19-20% year-over-year from January to March. 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.

As 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, while moderating, 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 may see declines, nationally, home prices are forecast to appreciate. And when we look at the country as a whole, none of the experts project home prices will net depreciate or fall. They’re all projecting ongoing appreciation.

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