There is much discussion right now about how the price of a home is appreciating. In spite of headlines about continued price appreciation, some sellers are lowering the price of their houses. If the situation becomes confusing and difficult to understand, it can become difficult to gain a clear understanding.
It is sometimes difficult to understand the meaning of what experts are saying when they use similar words. Let us examine the differences among these terms so we can become more clear about what experts say.
Appreciation is when home prices increase.
Depreciation is when home prices decrease.
Deceleration is when home prices continue to appreciate at a slower or more moderate pace.
According to experts, we are experiencing a deceleration nationally, which means that home values are appreciating, but not at the same rate as they have over the past year. According to CoreLogic, home prices are projected to increase by 15% by 2021, while earlier this year, the appreciation of home prices was over 20%. It is expected that this year, the appreciation of home prices will be approximately 10 to 11% lower.
The graph below illustrates how home prices have decelerated but not depreciated this year based on the latest CoreLogic data.
In the graph below, you can see that the prices of homes increased between 19-20% year over year from January to March, but they have slowed down in the past few months to 18%. This means that although prices are still increasing compared to the previous year, they are doing so at a slower rate than they were during the previous year.
As the Monthly Mortgage Monitor from Black Knight explains:
“Annual home price growth dropped by nearly two percentage points . . . – the greatest single-month slowdown on record since at least the early 1970s. . . While June’s slowdown was record-breaking, home price growth would need to decelerate at this pace for six more months to drive annual appreciation back to 5%, a rate more in line with long-run averages.”
Although home prices have moderated over the past year, they are still higher than average, and before we can even consider the idea of home prices falling, we would have to see an even greater deceleration before we can even consider any such possibility.
Because of this, home prices aren't falling or depreciating nationwide; they're just decelerating or moderating. Overall, home values are expected to increase, despite some unique and overheated markets experiencing declines. According to all experts, home prices will continue to appreciate for years to come when we consider the country as a whole.
As a result of all of this, the bottom line is
If you have questions about the current state of home prices, you can best speak with a trusted real estate professional.