Are Home Prices Going Up or Down? That Depends…

The media's coverage of what's going on with housing prices can be perplexing. A major portion of this is down to the type of data used and what they choose to highlight. There are two approaches for comparing home values over time in the housing market: year-over-year and month-over-month (Y-O-Y) and month-over-month (M-O-M). Here’s an explanation of each.

Year-over-Year (Y-O-Y):
▪ This comparison compares home price changes from the same month or quarter the previous year. For example, if you're comparing Y-O-Y home prices for April 2023, you'd compare them to April 2022 home prices.
▪ Y-O-Y comparisons concentrate on changes over a single year, providing a more detailed picture of long-term trends. They are commonly used to assess annual growth rates and determine whether the market is generally appreciating or declining.

Month-over-Month (M-O-M):
▪ The shift in housing prices from one month to the next is measured in this comparison. For example, if you're comparing M-O-M home prices for April 2023, you'd compare them to March 2023 home prices.
▪ M-O-M comparisons, on the other hand, examine changes within a single month, providing a more rapid glimpse of short-term movements and price swings. They are frequently used to monitor short-term changes in demand and supply, seasonal trends, or the influence of certain events on the housing market.

The major distinction between Y-O-Y and M-O-M comparisons is the temporal span under consideration. Both methodologies have advantages and disadvantages depending on the specific analysis required.

Why is this distinction so critical now?
We're about to enter a period in which home values may be lower than they were in the same month last year. April, May, and June of 2022 were three of the strongest months in the history of the American housing market for home prices. Those same months this year may fall short. That means that the Y-O-Y comparison will very certainly show that values are declining. The April data seem to indicate that's what we'll see in the next months (see graph below):


This will generate alarming headlines claiming that home values are plummeting. That will be correct on a year-over-year basis. Moreover, those headlines will encourage many people to believe that property values are currently falling.

However, a closer examination at M-O-M property pricing reveals that prices have been increasing for several months. Those monthly figures more closely represent what's going on with property values: after several months of decline, it looks we've reached bottom and are bouncing again.

Here's an example of M-O-M home price fluctuations from the CoreLogic Home Price Insights report over the last 16 months (see graph below):


Why Does This Matter to You?
So, if you see unfavorable news concerning home prices, keep in mind that they may not be entirely accurate. We'll be comparing prices to last year's record top for the next four months, which may make the year-on-year comparison appear more negative. However, if we look at the more recent, month-to-month statistics, we can see that housing prices are on the rise.

There is a benefit to purchasing a home now. You'll get a deal at a lower price than last year and before costs begin to rise even more. It's referred to as "buying at the bottom," and it's a wonderful thing.

In conclusion
Connect with a local real estate agent if you have questions about what's happening with home prices or if you're ready to buy before prices rise further.

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