If you've ever dreamed of buying your own place or selling your current house to upgrade, you're likely familiar with the rollercoaster of emotions that changing home prices can stir up. It's a journey filled with financial goals, doubts, and a dash of anxiety that many have experienced. But if you've put off your plans to move due to concerns about home prices dropping, it's time to put those worries to rest. The truth is, home prices are not on a downward spiral; in fact, they're heading in the opposite direction.

Home Prices Are On the Rise

National data from several credible sources clearly indicates that home prices have been consistently increasing throughout this year. Take a look at the graph below for a visual representation:

The graph illustrates the situation. In the first half of 2022, home prices experienced a significant surge, as shown by the green bars on the left side of the graph. These increases were striking and unsustainable.

Subsequently, during the latter half of the year, prices underwent a correction and started to dip slightly (highlighted in red). However, these minor declines were shallow and short-lived. Unfortunately, the media heavily focused on these drops in their headlines, which led to widespread fear and uncertainty among consumers.

The Uncovered Truth

What hasn't received enough attention is the fact that in 2023, home prices are once again on the upswing, but this time at a more normal and sustainable pace (as indicated by the green bars on the right side of the graph). Following the period of excessive price gains and the necessary corrections in 2022, the return to a more typical rate of price appreciation this year is excellent news for the housing market.

Orphe Divounguy, Senior Economist at Zillow, explains the trajectory of changing home prices over the past 12 months:

"The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023... That downturn has proven to be short-lived as housing has rebounded impressively so far in 2023."

What's Ahead for Home Prices?

It's essential to note that home price appreciation typically begins to ease up at this time of year. As that happens, there's a potential risk that the media may misinterpret slower price growth (a deceleration of appreciation) as falling home prices (depreciation). It's vital not to be misled – slower price growth is still growth.

Why Are Home Prices Increasing?

One significant reason for the resurgence in home prices is the persistent shortage of available homes for sale relative to the demand from prospective buyers. Higher mortgage rates, while moderating buyer demand, also discourage homeowners from selling and losing their current low mortgage rates to secure a higher rate for their next home.

As a result, both buyers and sellers have been affected by higher mortgage rates, influencing the supply and demand balance in the housing market. Freddie Mac elaborates on this:

"While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase..."

How This Impacts You

For Buyers: If you've been delaying your home purchase due to concerns about a potential drop in home values, the knowledge that home prices are on the rise should offer you peace of mind. Buying a home can provide you with an opportunity to own an asset that typically appreciates over time.

For Sellers: If you've been hesitant to put your house on the market because of worries about fluctuating home prices, now may be an excellent time to collaborate with a real estate agent and list your property. Recent data supports the notion that home prices have turned in your favor.

Bottom Line

If the fear of declining home prices has been holding you back, you can take solace in the data, which indicates that home prices are increasing across the country. To get a clear picture of how home prices are evolving in your local area, consider working with a trusted local real estate agent. Don't let misleading headlines influence your decisions; make informed choices based on the real state of the market.