If you’re contemplating a move to the Triangle area, one of your top concerns is likely the current state of home prices. Despite the media’s portrayal of a looming housing market crash, the reality is far less dramatic. While home price growth is moderating, it’s not declining. To gain a clear understanding of this trend, let’s delve into the details.
The housing market follows a predictable pattern of seasonal fluctuations, known as seasonality. Spring marks the peak homebuying season when market activity reaches its zenith. This activity typically remains robust in the summer but gradually tapers off as the cooler months approach. Home prices mirror this seasonal trend, appreciating most when demand is high.
This consistent seasonal pattern is evident in the long-term home price trajectory. The graph below, based on data from Case-Shiller, depicts the typical monthly home price movement from 1973 to 2022 (unadjusted to illustrate seasonality):
As the graph demonstrates, home prices tend to rise slower in the early months of the year compared to the spring and summer seasons. This is because the housing market is less active during January and February, as fewer people consider moving in colder months. As the market transitions into the peak homebuying season in spring, activity intensifies, leading to a more pronounced increase in home prices. This pattern gradually reverses as fall and winter approach, with activity and price appreciation slowing down.
After several exceptional years, the current higher mortgage rates have ushered in the first signs of a return to normal seasonality for home price growth. As Selma Hepp, Chief Economist at CoreLogic, explains:
High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.”
Why This Is So Important to Understand
As you follow discussions about Raleigh home prices in the coming months, you’ll likely encounter industry-specific terms like these:
- Appreciation: when prices increase.
- Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
- Depreciation: when prices decrease.
Don’t let these terms confuse you or allow misleading headlines to cause unnecessary anxiety. The rapid pace of home price growth witnessed in recent years was unsustainable. It was bound to slow down at some point, and that’s what we’re starting to see – deceleration of appreciation, not depreciation.
Remember, it’s common for home price growth to moderate as the year progresses. This doesn’t imply that Raleigh home prices are falling. They’re simply rising at a more gradual pace.
Bottom Line
While media headlines may paint a picture of doom and gloom surrounding home prices, the reality is far less dramatic. Home price appreciation is simply returning to its normal seasonal pattern. If you have questions about the local Triangle area market conditions, don’t hesitate to contact Linda Craft Team Realtors.