Are Home Prices Going Up or Down? Understanding the Different Perspectives
When it comes to the topic of home prices, things can get a little confusing due to different types of data and the way they're presented. Two common methods used to compare home prices are year-over-year (Y-O-Y) and month-over-month (M-O-M) comparisons. Let's break it down for a clearer understanding.
Year-over-Year (Y-O-Y) Comparison:
Y-O-Y comparisons look at how home prices have changed from the same month or quarter in the previous year. For example, if we're comparing Y-O-Y home prices for April 2023, we would look at how they compare to April 2022. This method gives us a broader view of long-term trends, helping us gauge if the market is generally appreciating or depreciating over the course of a year.
Month-over-Month (M-O-M) Comparison:
M-O-M comparisons, on the other hand, focus on the change in home prices from one month to the next. For instance, if we're comparing M-O-M home prices for April 2023, we're looking at the prices in relation to March 2023. This approach provides a more immediate snapshot of short-term fluctuations in prices, giving us insights into demand and supply dynamics, seasonal patterns, or the impact of specific events on the housing market.
The distinction between Y-O-Y and M-O-M comparisons lies in the time frame being analyzed. Each method serves its purpose depending on the specific analysis required.
Why is this Distinction Important Now?
In the coming months, home prices may appear lower compared to the same months of the previous year. April, May, and June of 2022 were exceptional months for home prices, setting new records. However, this year's performance might not reach those heights. As a result, Y-O-Y comparisons might show a depreciation in values. This could lead to headlines suggesting falling home values, causing concerns among consumers.
However, if we focus on M-O-M home prices, we can see that prices have actually been on an upward trend over the past few months. This suggests that after a period of depreciation, we have reached the bottom and are now bouncing back.
Why Does This Matter to You?
If you come across negative headlines about home prices, it's important to consider the bigger picture. While Y-O-Y comparisons may seem discouraging due to the high bar set by last year's peak, the M-O-M trends reveal a different story of prices heading back up.
This presents an advantageous opportunity for homebuyers. Buying now allows you to take advantage of discounted prices compared to the previous year before prices gain more momentum. It's like "buying at the bottom," which can be a smart move.
Bottom Line:
If you have questions about the current state of home prices or if you're considering buying a home before prices climb higher, let's connect. Together, we can navigate the evolving market dynamics and help you make informed decisions.
