The Return of Normal Seasonality for Home Price Appreciation
Are you thinking of making a move? One of your biggest questions is likely: What’s happening with home prices? The nationwide news is reporting the decline of home prices. The truth is that price growth is starting to normalize. Knowing the current housing market's context is essential to understand this trend.
Within the housing market, predictable ebbs and flows happen each year. These changes are called seasonality. Spring is the peak homebuying season. This is when the housing market is at its busiest, and this higher activity will continue through the summer. Activity begins to wane as the cooler months approach. Home prices follow along with seasonality because prices appreciate most when demand is high.
That’s why there’s a reliable long-term home price trend. The graph below uses data from Case-Shiller to show standard monthly home price movement from 1973 through 2022 (not adjusted so that you can see the seasonality):
You can see from the data that home prices grow at the beginning of the year, but less than they do in the spring and summer markets. The market is less active in January and February due to fewer people moving in the cooler months. As the market transitions into the peak homebuying season in the spring, activity ramps up, and home prices increase significantly in response. As fall and winter approach, activity eases again. Price growth slows but still commonly appreciates.
Following several unusual ‘unicorn’ years, the current higher mortgage rates helped usher in the first indications of the return of seasonality. As Selma Hepp, Chief Economist at CoreLogic, explains:
“High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.”
Why Is This So Important to Understand?
The media will talk more about home prices in the coming months. Their coverage will likely use industry terms such as:
- Appreciation: when prices increase.
- Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
- Depreciation: when prices decrease.
While the terminology may be confusing, don't let misleading headlines cause unnecessary fear. The rapid pace of the market's recent home price growth wasn't sustainable. It had to slow down at some point. We’re starting to see a deceleration of appreciation, not depreciation.
Remember, it’s expected to see home price growth slow down as the year progresses. This deceleration doesn’t indicate home prices are falling. They’re simply growing at a more moderate pace.
Home price appreciation is returning to normal seasonality. Current housing market headlines can generate fear and confusion, so it's important to understand the context of home price trends. Do you have questions about what's happening with home prices in the Kansas City area? The Just Say Home real estate experts are ready to give you clarity and confidence to move forward with your next move!