If you’re trying to decide whether or not to sell your house, recent headlines about home prices may be top of mind. And if those stories have you wondering what that means for your home’s value, here’s what you really need to know.

What’s Really Happening with Home Prices?

It’s possible you’ve seen news stories mentioning a drop in home values or home price depreciation, but it’s important to remember those headlines are designed to make a big impression in just a few words. But what headlines aren’t always great at is painting the full picture.

While home prices are down slightly month-over-month in some markets, it’s also true that home values are up nationally on a year-over-year basis. The graph below uses the latest data from S&P Case-Shiller to help tell the story of what’s actually happening in the housing market today:

As the graph shows, it’s true home price growth has moderated in recent months (shown in green) as buyer demand has pulled back in response to higher mortgage rates. This is what the headlines are drawing attention to today.

But what’s important to notice is the bigger, longer-term picture. While home price growth is moderating month-over-month, the percent of appreciation year-over-year is still well above the home price change we saw during more normal years in the market.

The bars for January 2019 through mid-2020 show home price appreciation around 3-4% a year was more typical (see bars for January 2019 through mid-2020). But even the latest data for this year shows prices have still climbed by roughly 10% over last year.

What Does This Mean for Your Home’s Equity?

While you may not be able to capitalize on the 20% appreciation we saw in early 2022, in most markets your home’s value, on average, is up 10% over last year – and a 10% gain is still dramatic compared to a more normal level of appreciation (3-4%).

The big takeaway? Don’t let the headlines get in the way of your plans to sell. Over the past two years alone, you’ve likely gained a substantial amount of equity in your home as home prices climbed. Even though home price moderation will vary by market moving forward, you can still use the boost your equity got to help power your move.

As Mark Fleming, Chief Economist at First American, says:

“Potential home sellers gained significant amounts of equity over the pandemic, so even as affordability-constrained buyer demand spurs price declines in some markets, potential sellers are unlikely to lose all that they have gained.”

Bottom Line

If you have questions about home prices or how much equity you have in your current home, let’s connect so you have an expert’s advice.

If you’re thinking about buying or selling a home this year, you may have questions about what’s happening with home prices today as the market cools. In the simplest sense, nationally, experts don’t expect prices to come crashing down, but the level of home price moderation will depend on factors like supply and demand in each local market.

That means, moving forward, home price appreciation will continue to vary by location, with more significant changes happening in overheated areas. Here’s a quick snapshot of what the experts are saying:

Danielle Hale, Chief Economist at realtor.com, says:

“The major question on the minds of homeowners and aspiring buyers alike is what will happen to home prices. . . Soaring prices were propelled by all-time low mortgage rates which are a thing of the past. As a result, home price growth is expected to continue slowing, dipping below its pre-pandemic average to 5.4% for 2023, as a whole.”

Mark Fleming, Chief Economist at First American, says:

“House price appreciation has slowed in all 50 markets we track, but the deceleration is generally more dramatic in areas that experienced the strongest peak appreciation rates.”

Taylor Marr, Deputy Chief Economist at Redfin, says:

“For those bearish folks eagerly awaiting the home price crash, you’ll have to keep waiting. As much as demand is pulling back supply is as well reducing downward pressure on prices in the short run.”

John Paulson, Founder of Paulson & Co., says:

“It’s true – housing may be a little frothy. So housing prices may come down or they may plateau . . .”

What Does This Mean for You?

The best way to get the answers you need is to lean on a local real estate advisor. They’ll be able to explain the latest trends in your specific market so you can make a confident and informed decision on your next step toward buying or selling a home.

Bottom Line

If you have questions about what’s happening with home prices today, let’s connect so you have the latest on our local market.

Every time there’s a news segment about the housing market, we hear about the affordability challenges buyers are facing today. Those headlines are focused on how much mortgage rates have climbed this year. And while it’s true rates have risen dramatically, it’s important to remember they aren’t the only factor in the affordability equation.

Here are three measures used to establish home affordability: home prices, mortgage rates, and wages. Let’s look closely at each one.

1. Mortgage Rates

This is the factor most people are focused on when they talk about homebuying conditions today. So far, current rates are almost four full percentage points higher than they were at the beginning of the year. As Len Kiefer, Deputy Chief Economist at Freddie Mac, explains:

“U.S. 30-year fixed mortgage rates have increased 3.83 percentage points since the end of last year. That’s the biggest year-to-date increase in rates in over 50 years.”

That increase in mortgage rates is impacting how much it costs to finance a home purchase, creating a challenge for many buyers that’s pricing some out of the market. While the current global uncertainty makes it difficult to project where mortgage rates will go in the future, experts do say that rates will likely remain high as long as inflation does.

2. Home Prices

The second factor at play is home prices. Home prices have made headlines over the past few years because they skyrocketed during the pandemic. Now, the most recent Home Price Index from S&P Case-Shiller shows home values continued to decelerate for a fifth consecutive month (shown in green in the graph below):

This deceleration is happening because higher mortgage rates are moderating demand, and as a result, easing the buyer competition and bidding wars that previously drove prices up.

What’s worth noting though, is how much higher home prices still are than they were before the pandemic (shown in blue in the graph above). Even now, we have a long way to go to get to more normal levels of home price appreciation, which is historically closer to 4%. When both mortgage rates and home prices are high, affordability and your purchasing power become a greater challenge.

But while prices are still elevated in many markets, some areas are seeing slight declines. It all depends on your local market. For insight into what’s happening in your area, reach out to a trusted real estate professional.

3. Wages

The one big, positive component in the affordability equation is the increase in American wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time. This year is no exception.

As the Bureau of Labor Statistics (BLS) reports:

“Median weekly earnings of the nation’s 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported…This was 6.9 percent higher than a year earlier…”

So, when you think about affordability, remember the full picture includes more than just mortgage rates. Home prices and wages need to be factored in as well. Because wages have been rising, they’re a big reason why serious buyers are still purchasing homes this year.

If you have questions or want to learn more, reach out to a trusted advisor who can explain how all of these variables work together and what’s happening in your area. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:

“Buying or selling a home involves a series of requirements and variables, and it’s important to have someone in your corner from start to finish to make the process as smooth as possible… and objectivity to deliver trusted expertise to consumers in every U.S. ZIP code.”

Bottom Line

To learn more, let’s connect today and make sure you have a trusted lender so you’re able to make an informed decision if you’re planning to buy or sell a home right now.

As the housing market cools in response to the dramatic rise in mortgage rates, home price appreciation is cooling as well. And if you’re following along with headlines in the media, you’re probably seeing a wide range of opinions calling for everything from falling home prices to ongoing appreciation. But what’s true? What’s most likely to happen moving forward?

While opinions differ, the most likely outcome is we’ll fall somewhere in the middle of slight appreciation and slight depreciation. Here’s a look at the latest expert projections so you have the best information possible today.

What the Experts Are Saying About Home Prices Next Year

The graph below shows the most up-to-date forecasts from five experts in the housing industry. These are the experts that have most recently updated their projections based on current market trends:

As the graph shows, the three blue bars represent experts calling for ongoing home price appreciation, just at a more moderate rate than recent years. The red bars on the graph are experts calling for home price depreciation.

While there isn’t a clear consensus, if you take the average (shown in green) of all five of these forecasts, the most likely outcome is, nationally, home price appreciation will be fairly flat next year.

What Does This Mean?

Basically, experts are divided on what’s ahead for 2023. Home prices will likely depreciate slightly in some markets and will continue to gain ground in others. It all depends on the conditions in your local market, like how overheated that market was in recent years, current inventory levels, buyer demand, and more.

The good news is home prices are expected to return to more normal levels of appreciation rather quickly. The latest forecast from Wells Fargo shows that, while they feel prices will fall in 2023, they think prices will recover and net positive in 2024. That forecast calls for 3.1% appreciation in 2024, which is a number much more in line with the long-term average of 4% annual appreciation.

And the Home Price Expectation Survey (HPES) from Pulsenomics, a poll of over one hundred industry experts, also calls for ongoing appreciation of roughly 2.6 to 4% from 2024-2026. This goes to show, even if prices decline slightly next year, it’s not expected to be a lasting trend.

As Jason Lewris, Co-Founder and Chief Data Officer for Parcl, says:

“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.”

Don’t let fear or uncertainty change your plans. If you’re unsure about where prices are headed or how to make sense of what’s going on in today’s housing market, reach out to a local real estate professional for the guidance you need each step of the way.

Bottom Line

The housing market is shifting, and it’s a confusing place right now. Let’s connect so you have a trusted real estate professional to help you make confident and informed decisions about what’s happening in our market.

The talk of a housing bubble in the coming year seems to be at a fever pitch as rising mortgage rates continue to slow down an overheated real estate market. Over the past two years, home prices have appreciated at an unsustainable pace causing many to ask: are things just slowing down, or is a crash coming?

To answer this question, there are two things we want to understand. The first is the reality of the shift in today’s housing market. And the second is what experts are saying about home prices in the coming year.

The Reality of the Shift in Today’s Housing Market

The reality is we’re seeing an inflection point in housing supply and demand. According to realtor.com, active listings have increased more than 26% over last year, while showings from the latest ShowingTime Showing Index have decreased almost 17% from last year (see graph below). This is an inflection point for housing because, over the past two years, we’ve seen a massive amount of demand (showings) and not enough homes available for sale for the number of people that wanted to buy. That caused the market frenzy.

Today, supply and demand look very different, and the market is slowing down from the pace we’ve seen. This offers proof of the sudden slowdown so many people are feeling.

What Experts Are Saying About Home Prices in the Coming Year

Right now, most experts are forecasting home price appreciation in 2023, but at a much slower pace than the last two years. The average of the six forecasters below is for national home prices to appreciate by 2.5% in the coming year. Only one of the six is calling for home price depreciation.

When we look at the shift taking place along with what experts are saying, we can conclude the national real estate market is slowing down but is not a bubble getting ready to burst. This isn’t to say that a few overheated markets won’t experience home price depreciation, but there isn’t a case to be made for a national housing bubble.

Bottom Line

The real estate market is slowing down, and that’s causing many to fear we’re in a housing bubble. What we’ve experienced in the housing market over the past two years were historic levels of demand and constrained supply. That led to homes going up in value at a record pace. While some overheated markets may experience price depreciation in the short term, according to experts, the national real estate market will appreciate in the coming year.