The Housing Market Rollercoaster: Rising Home Prices in 2023

Have you ever found yourself daydreaming about owning your own piece of real estate or contemplating selling your current home to make an upgrade? If so, you're well acquainted with the emotional rollercoaster that shifting home prices can trigger. It's a narrative woven with financial aspirations, moments of doubt, and a touch of anxiety—a journey many have traversed.

Perhaps you've postponed your moving plans due to concerns that home prices might take a nosedive. Well, here's the reality check you've been waiting for: they're not heading south. In fact, quite the opposite is happening. Multiple national sources have gathered data indicating a consistent upward trajectory in home prices this year (check out the graph below):

What this graph illustrates is that in the first half of 2022, we witnessed a significant surge in home prices (those vivid green bars on the left side of the graph). These increases were remarkable, to say the least, but they were also unsustainable.

Consequently, in the latter half of the year, prices underwent a correction, experiencing a slight dip (as indicated by the red bars). However, these declines were modest and short-lived. Unfortunately, the media honed in on these drops, generating fear and uncertainty among consumers.

What hasn't received the attention it deserves is the current scenario in 2023. Prices are once again on the rise, but this time at a more reasonable pace (notice the green bars on the right side of the graph). After the overly high price gains and the subsequent corrections in 2022, the fact that all three reports are now showing more typical price appreciation this year bodes well for the housing market.

Orphe Divounguy, Senior Economist at Zillow, provides a clear perspective on the changes in home prices over the past 12 months:

"The U.S. housing market has seen a surge over the past year following a brief hiccup from July 2022 to January 2023... That downturn has proven to be short-lived as housing has rebounded impressively in 2023."

Looking ahead, it's important to note that home price appreciation typically starts to ease up around this time of year. There's a risk that the media might misinterpret slower price growth (a deceleration of appreciation) as home prices falling (depreciation). Don't be misled—slower price growth is still growth.

But why are home prices on the rise once again? One major reason is the persistent shortage of homes for sale compared to the high demand from potential buyers. Although higher mortgage rates have led to a moderation in buyer demand, they've also caused a reduction in the supply of available homes, primarily due to the mortgage rate lock-in effect. As rates increase, some homeowners are reluctant to sell and give up their current low mortgage rates to secure a higher rate for their next home.

So, with higher mortgage rates affecting both buyers and sellers, the balance between supply and demand in the housing market has been disrupted. Yet, since there are still more aspiring homeowners than there are homes available, prices continue their ascent. As Freddie Mac puts it:

"While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase."

Now, let's break down how all of this impacts you:

For Buyers: If you've been holding off on purchasing a home out of fear that its value might plummet, the recent upswing in home prices should provide some reassurance. Acquiring a home presents you with the opportunity to own an asset that typically appreciates over time.

For Sellers: If you've delayed selling your house because of concerns about fluctuating home prices, it may be an opportune moment to collaborate with a real estate agent and list your property. There's no need to wait any longer, as the latest data suggests that home prices are currently working in your favor.

In summary, if you've been postponing your housing plans due to apprehensions about declining home prices, the data points to a nationwide increase. It's worth connecting with us to gain a better understanding of how home prices are evolving in your local area. Let's connect so that you can have a seasoned local expert by your side, guiding you seamlessly through every step of this journey.