Unraveling Home Prices: Comparing Present and Past Appreciation
Here’s what you need to know about our market to understand prices.
As we enter the second half of this year, it’s important to consider some key factors. Comparing real estate metrics between different years can be challenging due to market variability, making such comparisons less meaningful or accurate. Unforeseen events can significantly impact circumstances and outcomes, further complicating comparisons. In particular, when comparing this year’s housing numbers to the unique circumstances of the COVID years, it’s like comparing apples and oranges.
The real estate landscape underwent profound changes during the pandemic. The demand for homes soared as people sought larger spaces with home offices and spacious backyards for remote work. Waves of first-time and second-time homebuyers flooded the market, attracted by historically low mortgage rates. Foreclosure rates were largely mitigated by government forbearance plans, and home values reached unprecedented appreciation levels. It was a market that had long been sought after but difficult to find, hence the term “pandemic unicorn years.”
Now, as things return to a more normal state, those unicorn years are behind us. Comparing today’s market to that period doesn’t make sense. Instead, we should examine the historical context. Let’s explore three examples of buyer demand. Despite headlines suggesting a lack of buyers, we are still selling over 10,000 homes daily in the United States. Although buyer demand has decreased compared to the past two years, it remains remarkably strong when compared to normal years like 2017 and 2019.
“Foreclosures are nothing to worry about.”
Next, let’s consider home prices. Today’s prices cannot be directly compared to the significant appreciation seen in the past couple of years. Numerous factors contributed to those increases. Presently, we are witnessing a return to a more normal historical pattern of home value appreciation, as indicated by data from Freddie Mac. There were a few months of minimal depreciation in the second half of 2022, but Fannie Mae reports that the market has now returned to a more typical appreciation pattern in the first two quarters of 2023.
Lastly, there have been sensationalized headlines about foreclosure filings increasing. It’s important to note that while percentages may appear higher, they are increasing from historically low foreclosure rates observed in the past two years. Putting the current numbers into perspective, they align with the normal foreclosure filings seen from 2000 to 2002. It’s crucial to acknowledge the hardship faced by families who lose their homes to foreclosure, but it’s also necessary to contextualize the current situation.
If you have questions about this topic or anything else, please call or email me. I am always willing to help!