KC Homeowners: Are Home Prices Going Up or Down? That Depends...
Do you find media coverage about home prices confusing? Much of this lack of clarity is due to the type of data used and what elements of this data are being highlighted. Two methods are used to compare home prices over different time periods: year-over-year (Y-O-Y) and month-over-month (M-O-M). Here’s an explanation of each and how they differ.
This comparison measures the shift in home prices from the same month or quarter in the previous year. For example, Y-O-Y home prices for April 2023 are compared to those for April 2022.
This comparison focuses on the change over one year, providing a more comprehensive view of long-term trends. This method helps evaluate annual growth rates and determine if the market is overall appreciating or depreciating.
This comparison measures the change in home prices from one month to the next. For instance, if you’re comparing M-O-M home prices for April 2023, you would compare them to the home prices for March 2023.
M-O-M comparisons analyze shifts within a single month. This gives a more immediate snapshot of short-term movements and price fluctuations. This method is often used to track rapid changes in demand and supply, seasonal trends, or the impact of specific events on the housing market.
The critical distinction between Y-O-Y and M-O-M comparisons lies in the time frame being analyzed. Both of these approaches have their merits and serve different purposes depending on the specific analysis required.
Why Is This Distinction So Important Right Now?
We’re about to enter a few months when home prices could be lower than they were the same month last year. April, May, and June of 2022 were three of the best months for home prices in the history of the American housing market. Those same months this year might not measure up. Due to this, the Y-O-Y comparison will likely show values are depreciating. The numbers for April appear to confirm this evaluation (see graph below):
This difference might generate alarming headlines that alert the fall home values. This is accurate for a Y-O-Y conclusion. Many of these headlines will lead consumers to fear that home values are currently cascading downward.
However, when we look at M-O-M home prices, it is more precise to say that prices have been appreciating for the last several months. Those M-O-M numbers more accurately reflect what’s truly happening with home values: after several months of depreciation, we’ve hit bottom and are bouncing back.
The CoreLogic Home Price Insights report provides an example of M-O-M home price movements for the last 16 months (see graph below):
What Does This Mean For You?
If you hear or read negative headlines about home prices, it’s important to remember they may not be painting the complete picture. Over the next few months, prices will be compared to last year’s record peak, which may make the Y-O-Y comparison feel more negative. However, the more immediate M-O-M trends tell a different story: home prices are on the way back up.
There’s a benefit to buying a home in the current Kansas City housing market. You’ll buy at a discount from last year’s price and before prices start to pick up even more momentum. It’s called “buying at the bottom,” and that’s a good thing.
Do you have more questions about home price projections? Are you ready to buy before prices climb higher? The Just Say Home KC real estate experts are current on housing trends and prepared to help you navigate the current market. Find your perfect home today!