What Every Seller Needs to Know About Today's Home Prices
Have you been on the fence about whether or not to sell your house? If so, I’m sure recent headlines about home prices are top of mind, and you’re probably wondering what that means for your home's value. So let’s dive into what you really need to know.
You may have seen recent articles with headlines about a drop in home values or in some cases a crash in the market. What’s important to remember is those headlines have one purpose: to have a significant impact in just a few words. But what those headlines fail to do is paint a complete picture of what’s really going on in the housing market. Keep in mind that 2020 and 2021 were anomalies in the real estate market, so a price decline doesn’t mean the market is headed for a crash.
It’s true that home prices are down slightly month-over-month in a lot of markets across the nation. Here in the Daytona Beach market, we’ve started seeing longer days on market and some price reductions on homes that have been on the market for a couple of months. And we’ve definitely seen the buyer frenzy calm down in terms of homes flying off the market within hours and with multiple offers on the table. Keep in mind that 2020 and 2021 were anomalies in the real estate market, and it doesn’t mean the market is headed for a crash.
Let’s take a look at some graphs below that show what’s going on in the housing market, but I want to show this to you in a way that I hope helps you understand why it’s important to look at the whole picture. If I showed you this graph and said, “here we see the year-over-year percent change in home prices” what would you think? It’s difficult to make heads or tails with so little information, but we might see a decline and think this represents a housing crash. So, let’s add a little more information.
So what if I showed you this graph and told you “here we see the year-over-year percent change in home prices.” It certainly gives us more information. We see a graph that probably represents a longer period of time, but I could show you this graph and make up pretty much any story I wanted. I could tell you that this graph represents home prices, which saw some great growth but now values are beginning to tumble. Without all of the information, how would you know?
So let’s take a look at the whole picture. Here we see what’s actually happening in the housing market today. As the graph shows in green, it’s true that home prices have moderated in recent months. Buyer demand has pulled back in response to higher mortgage rates, and this is what the headlines use to draw attention. But it’s important to see the bigger, longer-term picture because, without it, you can jump to inaccurate conclusions.
The past few years have been anything but normal, and while home price growth is moderating month-over-month, the percent of appreciation year-over-year is still well above the normal years in the market. The bars for 2019 through mid-2020 show home price appreciation of around 3-4% a year was more in line with a typical stable market. But even the latest data for this year shows prices have still climbed by roughly 10% over last year.
The big takeaway? Don’t let the headlines mislead you. The double-digit appreciation we saw over the last 18 months or so is not sustainable long-term. But we’ve seen homeowners gain tremendous equity in that time and we’re still seeing values appreciating at an average far above normal. And remember that it’s important to have all of the information and not just a small snapshot that doesn’t paint a complete picture.