There are plenty of ominous headlines about the direction of home prices right now. “Are home prices poised to plummet?” and other such attention grabbers are flooding our newsfeeds. It’s true that home prices are generally not as high as earlier in the year and competition among buyers is easing up. But we’ve maintained that this is movement toward a balanced market, meaning that the playing field is starting to level out between sellers and buyers rather than significantly favoring sellers. Does this mean that home owners are experiencing depreciation? No. Let’s review some key terminology to explain.
Appreciation is a term used when home prices increase because conditions have made a home more valuable. Depreciation means that a home’s price decreases because conditions have lessened that home’s value. Deceleration describes the continued appreciation of home value, but at a slower or more moderate pace than previously experienced.
National real estate experts agree that deceleration, not depreciation, is what is happening in housing right now. CoreLogic data indicated in 2021 that homes appreciated by an average of 15% nationally and up to 20% in early 2022. They forecast that homes will continue to appreciate around 10% on average in the near future. Simply said, home prices are rising, just not at the record pace that’s been the case in the past year.
Monthly Mortgage Monitor reported “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.” The critical takeaway is that we’ll have to see significantly more deceleration to even meet the more typical 5% appreciation average.
Certainly some parts of the country that were uniquely overheated in pricing compared to others will likely see sharper price drops. Those areas include the Pacific northwest, California, the southwest, and most of Florida. With regard to the rest of the country, however, Realtor.com’s chief economist, Danielle Hale said, “I don’t think it’s likely for home prices to fall significantly. Prices are still growing [annually] by double digits. We have a long way to go before we see prices decline.”
Connect with us at Platinum Service Realty if you want to know more details about home prices in your specific location in the Greater Cincinnati area.
Real Estate Term of the Week
Deceleration In housing terms, deceleration means continued appreciation of homes, but at a slower pace than recent times.