home prices

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Home Values Rise Even as Median Prices Fall

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Recent headlines have been buzzing about the median asking price of homes dropping compared to last year, and that’s sparked plenty of confusion.

And as a buyer or seller, it’s easy to assume that means prices are coming down. But here’s the catch: those numbers don’t tell the full story.

Nationally, home values are actually rising, even if the median price is down a bit. Let’s break down what’s really happening so you can make sense of the market without getting caught up in the fear the headlines create.

Homes on the Market Right Now Are Smaller

The biggest reason for the dip in median price is the size of homes being sold. The median price reflects the middle point of all the homes for sale at any given time. And that’ll be affected by the mix of homes on the market.

To show you how this works, here’s a simple explanation of a median (see visual below). Let’s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median (the middle one) is 10 cents. If you have two nickels and one dime, the median is now five cents.

 
 

In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn’t change. The same is true for housing.

Right now, there’s a greater number of smaller, less expensive homes on the market, and that’s bringing the overall median price down. But that doesn’t mean home values are declining.

As Danielle Hale, Chief Economist at Realtor.com, explains:

“The share of inventory of smaller and more affordable homes has grown, which helps hold down the median price even as per-square-foot prices grow further.”

And here’s the data to prove it. 

Price Per Square Foot Is Still Rising

One of the best ways to measure home values is by looking at the price per square foot. That’s because it shows how much you’re paying for the space inside the home.

The median asking price doesn’t take into account the size of different homes, so it may not always reflect the true value. And the latest national price per square foot data shows home values are still increasing, even though the median asking price has dropped (see graph below).

 
 

As Ralph McLaughlin, Senior Economist at Realtor.com, explains:

“When a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year.”

This means that while smaller homes are affecting the median price, the average home’s value is still rising. According to the Federal Housing Finance Agency (FHFA):

“Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.”

So, while headlines may make it sound like prices are crashing, you don’t have to worry. With a closer look and more reliable data, you can see that prices are still climbing nationally.

But it’s important to remember that home prices can vary by region. While national trends provide a big-picture view, local markets may be experiencing different conditions. A trusted agent is the best resource to explain what’s happening in your area.

Bottom Line

The decrease in median price is not the same as a decrease in home values. The median asking price is down mostly due to the mix of smaller, less expensive homes on the market.

The important thing to focus on is the price per square foot, which is a better indicator of overall market value—and those prices are still going up. If you have questions about what home prices are doing in your area, reach out to a local real estate agent who can provide insights on your specific market.

Read more at KeepingCurrentMatters.com

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Home Prices Fell in July for the First Time—This Is Good News for Buyers as the ‘Market Is Healing’

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Median home prices fell in July, marking the first-ever seasonal decline in a month that’s typically a peak time for home sales.

The national median list price dipped from $445,000 in June to $439,950 in July, according to a new monthly housing report by Realtor.com®.

This downturn can be attributed to a sluggish summer housing market, with buyers and sellers looking for more economic breaks before making a move.

“As mortgage rates fell in July to their lowest since March on expectations that the Federal Reserve will cut rates as early as September, we suppose some homebuyers may be holding out for lower rates over the next few months,” says Realtor.com senior economist Ralph McLaughlin in his analysis.

With many buyers watching mortgage rates from the sidelines, home sales are now moving at the slowest rate since 2020.

This hesitancy among buyers likely also contributed to prices being slashed on 18.9% of listings in July, up from 15.5% a year ago.

“Sellers are becoming more grounded with patience and price expectations,” McLaughlin adds.

Indeed, the share of listings with price cuts is the highest since 2022.

This all adds up to good news for buyers who have been waiting for home prices to come back down to earth.

Increase in homes for sale

While many homebuyers sat out July, those who did venture into the housing market fray had more listings to choose from than the same time last year.

The total number of homes for sale in July was 36.6% higher than the year prior, marking the ninth consecutive month of growth.

It “now sits at a post-pandemic high,” says McLaughlin. “It’s a welcome sign that the housing market is normalizing, and it tells us the market is healing.”

All four regions of the U.S. saw an increase in active home listings, with the South leading the way at 47.6%, followed by the West at 35.4%, the Midwest at 22.7%, and the Northeast at 14.7%.

Metros that saw the largest increases in the number of homes for sale included Tampa, FL, at 94.9%; Orlando, FL, at 78.7%; and San Diego at 77.7%.

Much like home prices, the jump in inventory is likely the result of one main factor: mortgage rates.

“The decrease in mortgage rates seen in July likely contributed to an increased pace of growth in listing activity,” says McLaughlin.

Where the fresh listings are

Newly listed homes surged 3.6% above last year’s levels, reflecting a notable increase in seller activity.

Buyers looking for the most fresh housing choices should head West, where there are 7.3% more newly listed homes than in July 2023. New listings also grew by 3% in the Northeast and 0.9% in the Midwest.

Only the South saw fresh listings fall, with 0.5% fewer new listings this July than last.

The metros that saw the largest increase in fresh listings compared with last year included Seattle, at 37.3%; San Jose, CA, at 30.8%; and Columbus, OH, at 17.4%.

The home price paradox

Despite the overall decline in the national median list price, it remained stable compared with the same time last year, when it was $440,000.

“However, when a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year,” says McLaughlin.

This somewhat confusing data is due to the fact that the median price per square foot continues to rise, increasing 3.1% in July compared with the same time last year.

The price per square foot in the 50 largest metros shot up between 24.1% and 81.9% compared with July 2019.

However, the rise in price per square foot has a silver lining for budget-minded buyers.

“This indicates that the inventory of smaller and more affordable homes has grown in share,” McLaughlin explains.

In July, as in the previous five months, the growth in homes priced in the $200,000 to $350,000 range outpaced all other price categories, as the number of homes for sale in this range grew by 47.3% year over year.

Homes are still lingering on the market

The typical home spent 50 days on the market in July, five more days than the same time last year and five more days than last month.

“July marks the fourth month in a row where homes spent more time on the market compared with the previous year as inventory continues to grow and home sales remain sluggish,” says McLaughlin.

However, this trend might change soon.

“We expect selling activity to continue to normalize as rates inch their way down over the next year, with potentially an unusual uptick in September if the Fed decides to cut rates,” McLaughlin predicts.

Read more at Realtor.com

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What’s Next for Home Prices and Mortgage Rates?

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If you’re thinking of making a move this year, there are two housing market factors that are probably on your mind: home prices and mortgage rates.

You’re wondering what’s going to happen next. And if it’s worth it to move now, or better to wait it out.

The only thing you can really do is make the best decision you can based on the latest information available. So, here’s what experts are saying about both prices and rates.

1. What’s Next for Home Prices?

One reliable place you can turn to for information on home price forecasts is the Home Price Expectations Survey from Fannie Mae – a survey of over one hundred economists, real estate experts, and investment and market strategists.

According to the most recent release, experts are projecting home prices will continue to rise at least through 2028 (see the graph below):

 
 

While the percent of appreciation varies year-to-year, this survey says we’ll see prices rise (not fall) for at least the next 5 years, and at a much more normal pace.

What does that mean for your move? If you buy now, your home will likely grow in value and you should gain equity in the years ahead. But, based on these forecasts, if you wait and prices continue to climb, the price of a home will only be higher later on. 

2. When Will Mortgage Rates Come Down?

This is the million-dollar question in the industry. And there’s no easy way to answer it. That’s because there are a number of factors that are contributing to the volatile mortgage rate environment we’re in. Odeta Kushi, Deputy Chief Economist at First American, explains:

“Every month brings a new set of inflation and labor data that can influence the direction of mortgage rates. Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates.”

What happens next will depend on where each of those factors goes from here. Experts are optimistic rates should still come down later this year, but acknowledge changing economic indicators will continue to have an impact. As a CNET article says:

“Though mortgage rates could still go down later in the year, housing market predictions change regularly in response to economic data, geopolitical events and more.”

So, if you’re ready, willing, and able to afford a home right now, partner with a trusted real estate advisor to weigh your options and decide what’s right for you. 

Bottom Line

Connect with a trusted real estate agent to make sure you have the latest information available on home prices and mortgage rate expectations. Together you’ll go over what the experts are saying so you can make an informed decision on your move.

Read more at KeepingCurrentMatters.com

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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What You Really Need To Know About Home Prices

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According to recent data from Fannie Mae, almost 1 in 4 people still think home prices are going to come down. If you’re one of the people worried about that, here’s what you need to know.

A lot of that fear is probably coming from what you’re hearing in the media or reading online. But here’s the thing to remember. Negative news sells. That means, you may not be getting the full picture. You may only be getting the clickbait version. As a source from Real Estate News explains:

“Housing market headlines are everywhere. Many are quite sensational, ending with exclamation points or predicting impending doom for the industry. Clickbait, the sensationalizing of headlines and content, has been an issue since the dawn of the internet, and housing news is not immune to it.”

Here’s a look at the data to set the record straight.

Home Prices Rose the Majority of the Past Year

Case-Shiller releases a report each month on the percent of monthly home price changes. If you look at their data from January 2023 through the latest numbers available, here’s what you’d see:

 
 

What do you notice when you look at this graph? It depends on what color you’re more drawn to. If you look at the green, you’ll see home prices rose for the majority of the past year.

But, if you’re drawn to the red, you may only focus on the two slight declines. This is what a lot of media coverage does. Since negative news sells, drawing attention to these slight dips happens often. But that loses sight of the bigger picture. 

Here’s what this data really says. There’s a lot more green in that graph than red. And even for the two red bars, they’re so slight, they’re practically flat. If you look at the year as a whole, home prices still rose overall.

It’s perfectly normal in the housing market for home price growth to slow down in the winter. That’s because fewer people move during the holidays and at the start of the year, so there’s not as much upward pressure on home prices during that time. That’s why, even the green bars toward the end of the year show smaller price gains.

The overarching story is that prices went up last year, not down.

To sum all that up, the source for that data in the graph above, Case Shiller, explains it like this:

“Month-over-month numbers were relatively flat, . . . However, the annual growth was more significant for both indices, rising 7.4 percent and 6.6 percent, respectively.”

If one of the expert organizations tracking home price trends says the very slight dips are nothing to worry about, why be concerned? Even Case-Shiller is drawing your attention to how those were virtually flat and how home prices actually grew over the year.

Bottom Line

The data shows that, as a whole, home prices rose over the past year. If you have questions about what’s happening with home prices in your local area, connect with a trusted real estate professional.

Read more at KeepingCurrentMatters.com

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Home price growth is back at pre-pandemic levels. Here’s what that means for buyers and sellers

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The rate at which home prices grow is slowing down.

U.S. home prices increased 0.6% from a month before in February, in line with the 0.6% average monthly gain in the roughly eight years leading up to the Covid-19 pandemic, according to a new Redfin analysis.

Before the pandemic, it was normal for prices to grow about half a percent every month, or to increase around 5% or 6% annually, said Daryl Fairweather, the chief economist at Redfin.

“We’re back to that trend, despite these higher mortgage rates,” she said.

A similar trend appeared in Moody’s Analytics House Price Index, said Matthew Walsh, assistant director and economist at Moody’s Analytics.

“Home prices are appreciating at the same pace as before,” he said. “It’s returned to the trend that we saw pre-pandemic.”

However, the market today is vastly different from the market two to eight years ago, experts say. The average home is still unaffordable for most potential buyers while inventory has slightly improved but not enough to meet demand.

“The sentiment we’re getting… is that neither sellers nor buyers are satisfied with this market,” Fairweather said. “Sellers are dissatisfied ... with offers that they’re getting. And buyers are disappointed in rising prices and rising mortgage rates.”

Levels of transactions are at ‘recessionary lows’ 

While the housing market has stabilized in terms of price growth, a major difference between the market today and the pre-pandemic period is the relatively low number of transactions, which is largely due to high mortgage rates, said Fairweather. Mortgage rates peaked at nearly 8% last year, but are still over 6%, according to Freddie Mac data.

In fact, the level of transactions are at “recessionary lows” despite “a pop in the data in February,” Walsh said.

Another factor affecting sales is the extremely limited supply of homes, he added.

New listings climbed 5% during the last four weeks ended March 17, the biggest year-over-year jump since May 2023, Redfin found. But “it’s like a small recovery from a rock bottom,” said Fairweather.

“We’re not back to where we were pre-pandemic,” she said.

Supply growth is mostly tied to a seasonal trend, economists say. Owners often list their homes for sale in February because they prefer to move in the spring and summertime, Walsh said.

And sometimes, life happens. “Another factor is just people needing to move for either a new job or they’re getting married, or there’s some other big life event,” Fairweather said.

The rate lock-in effect is loosening its grip

The mortgage rate lock-in effect, also known as the golden handcuff effect, kept homeowners with extremely low mortgage rates from listing their homes last year: They didn’t want to finance a new home at a much higher interest rate. Now, that is loosening its grip on the market and slightly boosting available supply, economists say.

“It was definitely keeping people in place, but the more time that passes, the less strong that effect becomes,” Fairweather said.

Some buyers who had put off listing their homes “are coming to terms with higher mortgage rates,” because they feel they can no longer postpone the move, Walsh explained.

While the rate lock-in effect is still playing a role in today’s low inventory, it will fade further over time, especially as the Federal Reserve decides to cut rates later this year, Fairweather said.

Mortgage rates are also forecast to modestly decline this year as the Fed trims interest rates, while home prices are likely to remain flat or unchanged nationally, Walsh said.

New builds are slightly improving

New-home sales are running at the high end of the range seen pre-pandemic, averaging about 600,000 per month, Walsh said. There were 661,000 new homes sold in January, 1.5% more than in December, according to the U.S. Census Bureau.

Buyers frustrated with the tight supply of existing homes, are giving a lift to the new-home market. “Builders are certainly benefiting from that,” he said.

Homebuilders can also offer buyers incentives that homeowners might not, such as mortgage rate buydowns or price cuts, Walsh added.

However, the boost is not enough to bolster the acute housing supply across the country. “It’s going to take us some time to make up for that gap, even though they’re building more than before,” he said.

Read more at CNBC.com

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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