Are HOME PRICES going UP or DOWN?
The media often creates confusion regarding changes in home prices. To help you make more sense of what is happening, it is important to understand the two methods used to compare home prices over different periods: one is YEAR-OVER-YEAR (Y-O-Y) versus MONTH-OVER-MONTH (M-O-M). What is the difference? Does it matter to you?
Let’s give you some context.
Year-over-Year (Y-O-Y):
This comparison measures the change in home prices from the same month or quarter in the previous year. For example, if you're comparing Y-O-Y home prices for June 2023, you would compare them to the home prices for June 2022.
Y-O-Y comparisons focus on changes over a one-year period, providing a more comprehensive view of long-term trends. They are usually useful for evaluating annual growth rates and determining if the market is generally appreciating or depreciating.
Month-over-Month (M-O-M):
This comparison measures the change in home prices from one month to the next. For instance, if you're comparing M-O-M home prices for June 2023, you would compare them to the home prices for May 2023.
M-O-M comparisons analyze changes within a single month, giving a more immediate snapshot of short-term movements and price fluctuations. They are used to track immediate shifts in demand and supply, seasonal trends, or the impact of specific events on the housing market.
The key difference between Y-O-Y and M-O-M comparisons lies in the time being assessed. Both approaches have their own merits and serve different purposes depending on the specific analysis required.
Why Is This Distinction So Important Right Now?
We’re about to enter a few months when home prices could be lower than they were the same month last year. April, May, and June of 2022 were three of the best months for home prices in the history of the American housing market. Those same months this year might not measure up. That means, the Y-O-Y comparison will probably show values are depreciating. The numbers for April seem to suggest that’s what we’ll see in the months ahead (see graph below): Thus, you could say prices are going down.
That’ll generate troubling headlines that say home values are falling. That’ll be accurate on a Y-O-Y basis. And those headlines will lead many consumers to believe that home values are currently cascading downward.
However, on a closer look at M-O-M home prices, we can see prices have actually been APPRECIATING for the last several months. Those M-O-M numbers more accurately reflect what’s truly happening with home values: after several months of resetting from the soaring highs, it appears we’ve hit bottom and are bouncing back.
Here’s an example of M-O-M home price movements for the last 16 months from the CoreLogic Home Price Insights report (see graph below) Would you say the trend is more UP or DOWN over the past 16 months?
Why Does This Matter to You?
So, if you’re hearing negative headlines about home prices, remember they may not be painting the full picture. For the next few months, we’ll be comparing prices to last year’s record peak, and that may make the Y-O-Y comparison feel more negative. But, if we look at the more immediate, M-O-M trends, we can see home prices are actually on the way back up.
There’s an advantage to buying a home now. You’ll buy at a discount on last year’s price and before prices start to pick up even more momentum. It’s called “buying at the bottom,” and that’s a good thing.
It is important to stay informed and keep an eye on the market in order to make the best decision for you and your family. For all the right moves, you need The Hudson Advantage! Contact us today at 704-659-5056 for more information or use the chat feature on our website.
