If you’ve ever dreamed of buying your own place, or selling your current house to upgrade, you’re no stranger to the rollercoaster of emotions changing home prices can stir up. It’s a tale of financial goals, doubts, and a dash of anxiety that many have been through.
But if you put off moving because you’re worried home prices might drop, make no mistake, they’re not going down. In fact, it’s just the opposite. National data from several sources says they’ve been going up consistently this year (see graph below):
The graph illustrates a significant surge in home prices during the initial half of 2022, indicated by the prominent green bars on the left side. However, it suggests that these price increments were notable yet unsustainable, pointing to a potential imbalance or volatility in the housing market during that period.
During the latter half of the year, there was a correction in prices, leading to a minor dip, depicted by the red portion in the graph. However, it emphasizes that these reductions were limited in scale and temporary. Despite the transient nature of the decline, the media’s focus on these drops in their headlines generated fear and uncertainty among consumers, potentially impacting their perceptions of the housing market.
The article points out that there has been insufficient coverage of the recent upward trend in home prices in 2023, depicted by the green bars on the right side of the graph. It highlights that the current increase is occurring at a more sustainable and conventional rate, contrasting the earlier excessive gains and subsequent corrections witnessed in 2022. This shift towards a more typical price appreciation in 2023 is portrayed as favorable news for the housing market.
Orphe Divounguy, Senior Economist at Zillow, explains changing home prices over the past 12 months this way:
“The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. . . . That downturn has proven to be short lived as housing has rebounded impressively so far in 2023. . .”
The article anticipates that at this time of year, home price appreciation usually begins to slow down. It warns about the potential confusion in the media, as the deceleration in price growth might be misconstrued as a decline in home prices. It emphasizes the need not to be misled, emphasizing that even with slower price growth, there is still a positive trajectory in terms of overall market value.
Why Are Home Prices Increasing Now?
One reason why home prices are going back up is because there still aren’t enough homes for sale for all the people who want to buy them.
While increased mortgage rates lead to a reduction in buyer demand, they simultaneously contribute to a decrease in the supply of available homes. This phenomenon is attributed to the mortgage rate lock-in effect, wherein rising rates discourage homeowners from selling as they would lose their current low mortgage rate, possibly having to accept a higher rate for their next property.
The dynamics of the housing market have been influenced by the impact of higher mortgage rates on both buyers and sellers. This phenomenon has affected the balance between supply and demand. Despite this, the persistent shortage of available homes relative to the number of prospective buyers has contributed to the continued increase in home prices. As Freddie Mac states:
“While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase . . .”
Here’s How This Impacts You
- 買家: If you’ve been waiting to buy a home because you were afraid its value might drop, knowing that home prices have gone back up should make you feel better. Buying a home gives you a chance to own something that usually becomes more valuable over time.
- 賣家: If you’ve been holding off on selling your house because you were worried about how changing home prices would impact its value, it could be a smart move to work with a real estate agent and put your house on the market. You don’t have to wait any longer because the most recent data indicates home prices have turned in your favor.
If you put off moving because you were worried that home prices might go down, data shows they’re increasing across the country. Let’s connect so you can understand how home prices are changing in our local area.