The Return of Normal Seasonality for Home Price Appreciation

If you're thinking about making a move in the housing market, one of your biggest questions is probably: what's happening with home prices? Despite the headlines you might be seeing, nationally, home prices aren't falling. Instead, price growth is beginning to normalize. Here's the context you need to fully understand this trend.

Understanding Seasonality

In the housing market, there are predictable ebbs and flows that occur each year, known as seasonality. Spring is traditionally the peak homebuying season when the market is most active. This high activity usually continues into the summer but begins to taper off as the cooler months approach. Home prices closely follow these seasonal patterns because prices tend to appreciate most when there's high demand.

This consistent seasonality creates a reliable long-term trend in home prices. The graph below, based on data from Case-Shiller, illustrates the typical monthly movement in home prices from 1973 through 2022 (not adjusted for inflation, so you can see the seasonality):

As the data shows, at the beginning of the year, home prices do increase, but not as significantly as they do during the spring and summer months. This is because the market is less active in January and February due to fewer people moving in the colder season. As the market transitions into the peak homebuying season in the spring, activity intensifies, leading to more significant price increases. Then, as fall and winter approach, activity eases, and price growth slows down, though it typically continues to appreciate.

The Return of Seasonality

After several unusual years, today's higher mortgage rates have helped bring back the traditional signs of seasonality. Selma Hepp, Chief Economist at CoreLogic, explains the current situation:

"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 This Is Important

In the coming months, you'll likely see more media coverage about home prices, and you may come across industry terms such as:

• Appreciation: When prices increase.

• Deceleration of appreciation: When prices continue to rise but at a slower or more moderate pace.

• Depreciation: When prices decrease.

It's essential not to be confused by the terminology or misled by sensational headlines. The rapid pace of home price growth that the market experienced in recent years was unsustainable. It was bound to slow down at some point, and what we're witnessing now is a deceleration of appreciation, not depreciation.

Remember, it's entirely normal for home price growth to slow down as the year progresses. This slowdown does not mean that home prices are falling; they are merely increasing at a more moderate pace.

While headlines might be causing fear and confusion about the state of home prices, the truth is straightforward: home price appreciation is returning to normal seasonality. If you have questions about what's happening with prices in your local area, don't hesitate to reach out and connect with a real estate professional who can provide you with accurate, localized information.