One of the biggest questions people are asking now is: what’s happening with home prices? There are headlines about ongoing price appreciation, but at the same time, some sellers are reducing the cost of their homes. That can feel not very clear and makes it more challenging to get a clear picture.
Part of the challenge is that it can be hard to understand what experts are saying when the words sound similar. So let’s break down the differences among those terms to help clarify what’s happening today.
- Appreciation is when home prices increase.
- Depreciation is when home prices decrease.
- Deceleration is when home prices continue to appreciate at a slower or more moderate pace.
Experts agree that, nationally, what we’re seeing today is deceleration. That means home prices are appreciating, just not at their record-breaking pace over the past year. In 2021, data from CoreLogic told us home prices appreciated by an average of 15% nationwide. And earlier this year, that appreciation was upward of 20%. This year, experts forecast home prices will appreciate at a decelerated pace of around 10 to 11%, on average.
The graph below uses the latest data from CoreLogic to help tell the story of how home prices are decelerating but not depreciating this year.
As the green bars show, home prices appreciated between 19-20% year-over-year from January to March. But over the last few months, the pace of that appreciation has decelerated to 18%. This means price growth is still climbing but slower than the previous year.
As the Monthly Mortgage Monitor from Black Knight explains:
“Annual home price growth dropped by nearly two percentage points . . . – the greatest single-month slowdown on record since at least the early 1970s. . . While June’s slowdown was record-breaking, home price growth would need to decelerate at this pace for six more months to drive annual appreciation back to 5%, a rate more in line with long-run averages.”
This means that while moderating, home prices are still far above the norm, and we’d have to see a lot more deceleration to fall in line with typical rates of home price growth. That’s still not home price depreciation.
The big takeaway is home prices haven’t fallen or depreciated nationwide; they’re just decelerating or moderating. So while some unique and overheated markets may see declines, nationally, home prices are forecast to appreciate. And when we look at the country as a whole, none of the experts project home prices will net depreciate or fall. Instead, they’re all projecting ongoing appreciation.
If you have questions about what’s happening with home prices in our local area, let’s connect.