Don’t Let Home Price Headlines Confuse You

As we all know, the media and some of the so called experts really don’t understand the housing market. Based on what you may be hearing or reading in the news about home prices, you may be under the impression that prices are falling.

But, if you look at the national data for 2023, home prices actually showed positive growth for the year. While this varies by market, and while there were some months with slight declines nationally, those were the exception, not the rule.

The overarching story is that prices went up last year, not down. On Cape Cod, the median sales price for single family homes was up 6.3% for 2023. There was no crash or increase in foreclosures.

2023 Was the Return to More Normal Home Price Growth

If anything, last year marked a return to more normal home price appreciation. To prove it, here’s what usually happens in residential real estate.

In the housing market, there are predictable ebbs and flows that take place each year. It’s called seasonality. It goes like this. Spring is the peak homebuying season when the market is most active. That activity is usually still strong in the summer, but begins to wane toward the end of the year. Home prices follow along with this seasonality because prices grow the most when there’s high demand.

The graph below uses data from Case-Shiller to show how this pattern played out in home prices from 1973 through 2022 (not adjusted, so you can see the seasonality):

As the data shows, for nearly 50 years, home prices match typical market seasonality. At the beginning of the year, home prices grow more moderately. That’s because the market is less active as fewer people move in January and February. Then, as the market transitions into the peak homebuying season in the spring, activity ramps up. That means home prices do too. Then, as fall and winter approach, activity eases again and prices grow, just at a slower rate.

Now, let’s layer the data that’s come out for 2023 so far (shown in green) on top of that long-term trend (still shown in blue). That way, it’s easy to see how 2023 compares.

As the graph shows, moving through the year in 2023, the level of appreciation fell more in line with the long-term trend for what usually happens in the housing market. You can see that in how close the green bars come to matching the blue bars in the later part of the year.

But some in the media and so called experts are only focusing on the two bars outlined in red. Here’s what you need to know. The long-term trend shows it’s normal for home prices to moderate in the fall and winter. That’s typical seasonality.

The headlines are going to call attention to the small month-to-month dips instead of the bigger year-long picture. And that can be a bit misleading because it’s only focused on one part of the whole story.

The real experts expect that prices will continue to appreciate in 2024 as buyers re-enter the market due to mortgage rates trending down compared to last year. As buyer demand goes up and the supply of homes for sale is still low, the upward pressure on prices will continue.

Bottom Line

We know that many of you have made the decision to move because your current home is to big, too small or you’re ready to make a change. But, as you wait for that perfect moment, your perfect home will be purchased by someone else and the best buyer for your house will find their dream home elsewhere. Maybe up the street because your neighbor decided to market their home.

If you have questions about what’s happening with home prices, let’s connect. We’ll give you our honest assessment without any click bait headlines.

You can reach us at 508-360-5664 or [email protected].

Talk soon…

Mari and Hank