What Every Seller Should Know About Home Prices
Recent headlines about home prices may be on your mind if you're trying to decide whether or not to sell your home. And if those stories have you wondering what that means for the value of your home, here's what you need to know.
What’s Really Happening with Home Prices?
You may have seen news stories mentioning a drop in home values or price depreciation, but keep in mind that those headlines are designed to make a big impression in just a few words. But headlines aren't always good at painting the whole picture.
While home prices are slightly lower month over month in some markets, they are higher year over year across the country. The graph below uses the most recent S&P Case-Shiller data to help tell the story of what's going on in the housing market today:
As shown in the graph, true home price growth has slowed in recent months (shown in green) as buyer demand has slowed in response to higher mortgage rates. This is what today's headlines are emphasizing.
However, it is critical to consider the bigger picture. While monthly home price growth is slowing, the year-over-year percentage of appreciation remains significantly higher than in more normal market years.
The bars from January 2019 to mid-2020 show that home price increases of 3-4% per year were more typical (see bars for January 2019 through mid-2020). Even so, the most recent data for this year show that prices have risen by roughly 10% over last year.
What Does This Mean for Your Home’s Equity?
While you may not be able to capitalize on the 20% appreciation we saw in early 2022, your home's value is up 10% on average in most markets over last year - and a 10% gain is still significant when compared to a more normal level of appreciation (3-4%).
What is the main takeaway? Don't let the headlines derail your sales efforts. You've most likely gained a significant amount of equity in your home over the last two years as home prices have risen. Even though future home price declines will vary by market, you can still use the equity boost to help power your move.
As Mark Fleming, Chief Economist at First American, says:
“Potential home sellers gained significant amounts of equity over the pandemic, so even as affordability-constrained buyer demand spurs price declines in some markets, potential sellers are unlikely to lose all that they have gained.”
If you have questions about home prices or how much equity you have in your current home, seek expert advice from a local real estate professional.
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