If you’ve ever aspired to step into the real estate market, whether as a potential buyer or seller, you’re familiar with the whirlwind of emotions that fluctuating home prices can invoke. 

The housing market is an arena where financial goals, uncertainties, and a dash of anxiety often come into play. However, if you’ve been postponing your real estate plans due to concerns about declining home prices, it’s essential to reevaluate your stance, as the data reveals an upward trajectory. In this blog, we’ll explore why home prices continue to climb, providing insights to help you make informed decisions.

Here’s what our sources have to say:

Let’s break this down!

Home Price Trends in 2022:

In the first half of 2022, we witnessed a substantial surge in home prices, as indicated by the prominent green bars on the left side of the graph below. These increases were noteworthy, but they were also unsustainable in the long run.

Market Correction in the Second Half of 2022:

The second half of 2022 saw a correction in prices, with a slight dip (highlighted in red). While media attention was primarily focused on these declines, it’s crucial to recognize that they were shallow and short-lived, leading to widespread fear and uncertainty among consumers.

Home Prices in 2023:

Fast forward to 2023, and we observe another upward trend in home prices, this time at a more sustainable pace (the green bars on the right side of the graph above). Following the high price gains and subsequent corrections of 2022, it’s reassuring to note that all three reports now demonstrate a return to more typical price appreciation in the current year, marking positive news for the housing market.

Orphe Divounguy, Senior Economist at Zillow, explains the past 12 months of shifting home prices as a temporary hiccup, stating that the downturn experienced between July 2022 and January 2023 has given way to impressive rebounds in 2023.

As we approach the end of the year, it’s common for home price appreciation to ease up. However, there’s a risk that the media might misinterpret this slowdown in price growth as falling home prices. It’s essential to differentiate between a deceleration of appreciation and actual depreciation. Slower price growth is, in fact, still a sign of growth.

So Why Are Home Prices on the Rise?

One key reason for the resurgence in home prices is the persistent shortage of homes available for sale to meet the demand from eager buyers.

Higher mortgage rates, while tempering buyer demand, also reduce the supply of homes on the market due to the mortgage rate lock-in effect. When interest rates rise, some homeowners are hesitant to sell and give up their current low mortgage rates, which leads to a reduced number of homes available for purchase. In the words of Freddie Mac:

“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.”

How Does This Impact You?

For Prospective Buyers: If you’ve been delaying your home purchase due to concerns about potential price drops, the resurgence in home prices offers reassurance. Owning a home remains a valuable investment that typically appreciates over time.

For Sellers: If you’ve been holding back on selling your property due to concerns about fluctuating home prices, this might be the ideal moment to collaborate with a real estate agent and list your home on the market. The most recent data suggests that home prices are now in your favor.

 

If you’ve been apprehensive about making a move in the real estate market due to concerns about declining home prices, rest assured that data indicates an upward trajectory in home prices nationwide. Reach out to us to gain insights into how these changes in home prices affect your local area.

Stay informed and make informed decisions with Milford’s expert insights and market updates. Contact us today to explore your options in the ever-evolving real estate landscape.