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Home Price Deceleration Doesn’t Mean Home Price Depreciation

Thursday, June 23, 2022   /   by Barbara Oleska

Home Price Deceleration Doesn’t Mean Home Price Depreciation

I hope you are enjoying your summer! The article below shares national insight for the overall market. Locally, we are seeing a bit of an increase in inventory, which is a relief! Sales are a bit slower, but ANYTHING feels slower after the crazy. Properties are lingering on the market longer (except mine, of course, because I get it DONE!). You've probably heard about many listings reducing (adjusting) their prices. It's not because prices are falling; it's because sellers got ahead of themselves. Pricing ahead of the market is a mistake. You have to be IN the market.

When you hear "bubble", know that this is NOT 2008. Our fundamentals are VERY different coming into this period. Yes, appreciation will slow down, but I really don't think we'll see a downturn in the South Florida market. Too many people are moving here and unless we get a huge wave of inventory, it will still be the game of supply and demand.

A fair amount of the cash has dried up. I can speculate that's because the majority of cash buyers have their wealth tied to the stock market, which, as we know, has been volatile. This has allowed opportunity for financing buyers who just couldn't compete against all that cash (except mine!). Of course, many buyers are reeling from the rapid increase in rates. I've been very busy vetting loans to make sure the buyers were preapproved at the current rates.

Every market has opportunity. If you've been thinking of selling, times are still good, just make sure you vet those buyers! Buyers, if you gave up because you couldn't compete against the cash and all the offers well over asking, you can get back in the game. Yes, rates are up, but if we continue to have appreciation (albeit more slowly) and rates continue to rise (which it looks like they will), owning will just become more expensive the longer you wait. With rents as crazy as they are, you may find that you are still better off owning.

Home Price Deceleration Doesn’t Mean Home Price Depreciation | MyKCM


Experts in the real estate industry use a number of terms when they talk about what's happening with home prices. And some of those words sound a bit similar but mean very different things. To help clarify what's happening with home prices and where experts say they're going, here’s a look at a few terms you may hear:

  • Appreciation is when home prices increase.
  • Depreciation is when home prices decrease.
  • Deceleration is when home prices continue to appreciate, but at a slower pace.

Where Home Prices Have Been in Recent Years

For starters, you’ve probably heard home prices have skyrocketed over the past two years, but homes were actually appreciating long before that. You might be surprised to learn that home prices have climbed for 122 consecutive months (see graph below):

Home Price Deceleration Doesn’t Mean Home Price Depreciation | MyKCM

As the graph shows, houses have gained value consistently over the past 10 consecutive years. But since 2020, the increase has been more dramatic as home price growth accelerated.

So why did home prices climb so much? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was high and supply was low.

Where Experts Say Home Prices Are Going

While this is helpful context, if you’re a buyer or seller in today’s market, you probably want to know what’s going to happen with home prices moving forward. Will they continue that same growth path or will home prices fall?

Experts are forecasting ongoing appreciation, just at a decelerated pace. In other words, prices will keep climbing, just not as fast as they have been. The graph below shows home price forecasts from seven industry leaders. None are calling for prices to fall (see graph below):

Home Price Deceleration Doesn’t Mean Home Price Depreciation | MyKCM

Mark Fleming, Chief Economist at First American, identifies a key reason why home prices won’t depreciate or drop:

In today’s housing market, demand for homes continues to outpace supply, which is keeping the pressure on house prices, so don’t expect house prices to decline.”

And although housing supply is starting to tick up, it’s not enough to make home prices decline because there’s still a gap between the number of homes available for sale and the volume of buyers looking to make a purchase.

Terry Loebs, Founder of the research firm Pulsenomics, notes that most real estate experts and economists anticipate home prices will continue rising. As he puts it:

“With home values at record-high levels and a vast majority of experts projecting additional price increases this year and beyond, home prices and expectations remain buoyant.”

Bottom Line

Experts forecast price deceleration, not depreciation. That means home prices will continue to rise, just at a slower pace. Let’s connect so you can get the full picture of what’s happening with home prices in our local market and to discuss your buying and selling goals.

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