According to recent data from Fannie Mae, almost 1 in 4 people still think home prices are going to come down. If you’re one of the people worried about that, here’s what you need to know.

A lot of that fear is probably coming from what you’re hearing in the media or reading online. But here’s the thing to remember. Negative news sells. That means, you may not be getting the full picture. You may only be getting the clickbait version. As a source from Real Estate News explains:

“Housing market headlines are everywhere. Many are quite sensational, ending with exclamation points or predicting impending doom for the industry. Clickbait, the sensationalizing of headlines and content, has been an issue since the dawn of the internet, and housing news is not immune to it.”

Here’s a look at the data to set the record straight.

Home Prices Rose the Majority of the Past Year

Case-Shiller releases a report each month on the percent of monthly home price changes. If you look at their data from January 2023 through the latest numbers available, here’s what you’d see:

What do you notice when you look at this graph? It depends on what color you’re more drawn to. If you look at the green, you’ll see home prices rose for the majority of the past year.

But, if you’re drawn to the red, you may only focus on the two slight declines. This is what a lot of media coverage does. Since negative news sells, drawing attention to these slight dips happens often. But that loses sight of the bigger picture.

Here’s what this data really says. There’s a lot more green in that graph than red. And even for the two red bars, they’re so slight, they’re practically flat. If you look at the year as a whole, home prices still rose overall.

It’s perfectly normal in the housing market for home price growth to slow down in the winter. That’s because fewer people move during the holidays and at the start of the year, so there’s not as much upward pressure on home prices during that time. That’s why, even the green bars toward the end of the year show smaller price gains.

The overarching story is that prices went up last year, not down.

To sum all that up, the source for that data in the graph above, Case Shiller, explains it like this:

“Month-over-month numbers were relatively flat, . . . However, the annual growth was more significant for both indices, rising 7.4 percent and 6.6 percent, respectively.”

If one of the expert organizations tracking home price trends says the very slight dips are nothing to worry about, why be concerned? Even Case-Shiller is drawing your attention to how those were virtually flat and how home prices actually grew over the year.

Bottom Line

The data shows that, as a whole, home prices rose over the past year. If you have questions about what’s happening with home prices in your local area, connect with a trusted real estate professional.

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The rate at which home prices grow is slowing down.

U.S. home prices increased 0.6% from a month before in February, in line with the 0.6% average monthly gain in the roughly eight years leading up to the Covid-19 pandemic, according to a new Redfin analysis.

Before the pandemic, it was normal for prices to grow about half a percent every month, or to increase around 5% or 6% annually, said Daryl Fairweather, the chief economist at Redfin.

“We’re back to that trend, despite these higher mortgage rates,” she said.

A similar trend appeared in Moody’s Analytics House Price Index, said Matthew Walsh, assistant director and economist at Moody’s Analytics.

“Home prices are appreciating at the same pace as before,” he said. “It’s returned to the trend that we saw pre-pandemic.”

However, the market today is vastly different from the market two to eight years ago, experts say. The average home is still unaffordable for most potential buyers while inventory has slightly improved but not enough to meet demand.

“The sentiment we’re getting… is that neither sellers nor buyers are satisfied with this market,” Fairweather said. “Sellers are dissatisfied ... with offers that they’re getting. And buyers are disappointed in rising prices and rising mortgage rates.”

Levels of transactions are at ‘recessionary lows’

While the housing market has stabilized in terms of price growth, a major difference between the market today and the pre-pandemic period is the relatively low number of transactions, which is largely due to high mortgage rates, said Fairweather. Mortgage rates peaked at nearly 8% last year, but are still over 6%, according to Freddie Mac data.

In fact, the level of transactions are at “recessionary lows” despite “a pop in the data in February,” Walsh said.

Another factor affecting sales is the extremely limited supply of homes, he added.

New listings climbed 5% during the last four weeks ended March 17, the biggest year-over-year jump since May 2023, Redfin found. But “it’s like a small recovery from a rock bottom,” said Fairweather.

“We’re not back to where we were pre-pandemic,” she said.

Supply growth is mostly tied to a seasonal trend, economists say. Owners often list their homes for sale in February because they prefer to move in the spring and summertime, Walsh said.

And sometimes, life happens. “Another factor is just people needing to move for either a new job or they’re getting married, or there’s some other big life event,” Fairweather said.

The rate lock-in effect is loosening its grip

The mortgage rate lock-in effect, also known as the golden handcuff effect, kept homeowners with extremely low mortgage rates from listing their homes last year: They didn’t want to finance a new home at a much higher interest rate. Now, that is loosening its grip on the market and slightly boosting available supply, economists say.

“It was definitely keeping people in place, but the more time that passes, the less strong that effect becomes,” Fairweather said.

Some buyers who had put off listing their homes “are coming to terms with higher mortgage rates,” because they feel they can no longer postpone the move, Walsh explained.

While the rate lock-in effect is still playing a role in today’s low inventory, it will fade further over time, especially as the Federal Reserve decides to cut rates later this year, Fairweather said.

Mortgage rates are also forecast to modestly decline this year as the Fed trims interest rates, while home prices are likely to remain flat or unchanged nationally, Walsh said.

New builds are slightly improving

New-home sales are running at the high end of the range seen pre-pandemic, averaging about 600,000 per month, Walsh said. There were 661,000 new homes sold in January, 1.5% more than in December, according to the U.S. Census Bureau.

Buyers frustrated with the tight supply of existing homes, are giving a lift to the new-home market. “Builders are certainly benefiting from that,” he said.

Homebuilders can also offer buyers incentives that homeowners might not, such as mortgage rate buydowns or price cuts, Walsh added.

However, the boost is not enough to bolster the acute housing supply across the country. “It’s going to take us some time to make up for that gap, even though they’re building more than before,” he said.

What You Really Need To Know About Home Prices

Read more at KeepingCurrentMatters.com

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