Home Prices Are Still Climbing
In the ever-changing world of real estate, one thing remains constant: home prices are still on the rise in this area. Across the United States, many states have experienced significant increases in home prices, which has both positive and negative implications for buyers, sellers, and investors alike. For potential homebuyers, the soaring home prices can be disheartening. Affordability has become a growing concern, especially for first-time buyers. Many individuals and families looking to purchase a home find themselves facing higher down payments and stricter lending requirements. As a result, the dream of homeownership feels further out of reach for many. However, it is important to note that not all hope is lost for buyers. Despite the rising prices, mortgage rates have remained historically low. This has helped to offset some of the increased costs associated with purchasing a home. Additionally, the demand for housing continues to be strong, leading to a competitive market where sellers may be more willing to negotiate on price. On the other side of the coin, sellers are reaping the benefits of the increasing home prices. The rise in home values has created a favorable seller’s market where homeowners can potentially sell their properties at a higher price than anticipated. This is especially true in areas with limited housing inventory, as the scarcity of available homes drives up prices even further. For sellers, however, it is crucial to navigate the market wisely. While it may be tempting to price a home at the highest possible value, it is important to consider market trends and comparable sales in the area. Overpricing a home can result in it sitting on the market for an extended period, potentially leading to price reductions and a lower final sale price. Investors, too, have been drawn to the real estate market due to the surging home prices. The potential for substantial returns on investment has attracted both seasoned and novice investors looking to capitalize on the market’s current conditions. However, it is important for investors to conduct thorough research and due diligence before diving in. Investing in real estate requires careful consideration of factors such as location, property condition, and potential for future appreciation. It is worth mentioning that while many states have seen significant increases in home prices, there are also regions where prices have remained relatively stable or even decreased. Real estate is highly localized, and factors such as local economies, job markets, and population growth can greatly influence housing prices. In conclusion, the current state of the real estate market is characterized by climbing home prices in many states. This presents challenges for buyers, especially first-time buyers, who may find it harder to enter the market. For sellers, the rising prices offer opportunities for profitable sales, but it is crucial to navigate the market wisely. Finally, investors are attracted to the potential for substantial returns, but should carefully consider the unique characteristics of each investment opportunity. By staying informed and adapting to the market’s dynamics, individuals can make sound decisions in the ever-changing world of real estate.
Are Home Prices Going Up or Down? That Depends...
Are Home Prices Going Up or Down? That Depends… Media coverage about what’s happening with home prices can be confusing. A large part of that is due to the type of data being used and what they’re choosing to draw attention to. For home prices, there are two different methods 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. Year-over-Year (Y-O-Y): This comparison measures the change in home prices from the same month or quarter in the previous year. For example, if you're comparing Y-O-Y home prices for April 2023, you would compare them to the home prices for April 2022. Y-O-Y comparisons focus on changes over a one-year period, providing a more comprehensive view of long-term trends. They are usually useful for evaluating annual growth rates and determining if the market is generally appreciating or depreciating. Month-over-Month (M-O-M): 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. Meanwhile, M-O-M comparisons analyze changes within a single month, giving a more immediate snapshot of short-term movements and price fluctuations. They are often used to track immediate shifts in demand and supply, seasonal trends, or the impact of specific events on the housing market. The key difference between Y-O-Y and M-O-M comparisons lies in the time frame being assessed. Both approaches have their own 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 possibly 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. That means, the Y-O-Y comparison will probably show values are depreciating. The numbers for April seem to suggest that’s what we’ll see in the months ahead (see graph below): That’ll generate troubling headlines that say home values are falling. That’ll be accurate on a Y-O-Y basis. And, those headlines will lead many consumers to believe that home values are currently cascading downward. However, on a closer look at M-O-M home prices, we can see prices have actually 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, it appears we’ve hit bottom and are bouncing back. Here’s an example of M-O-M home price movements for the last 16 months from the CoreLogic Home Price Insights report (see graph below): Why Does This Matter to You? So, if you’re hearing negative headlines about home prices, remember they may not be painting the full picture. For the next few months, we’ll be comparing prices to last year’s record peak, and that may make the Y-O-Y comparison feel more negative. But, if we look at the more immediate, M-O-M trends, we can see home prices are actually on the way back up. There’s an advantage to buying a home now. 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. Bottom Line If you have questions about what’s happening with home prices, or if you’re ready to buy before prices climb higher, let’s connect.
