When discussing the current state of home prices, real estate experts use a variety of terms. And while some of those words sound similar, they mean very different things. Here are a few terms you may hear to help you understand what's going on with home prices and where experts believe they're headed:

• 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 that home prices have skyrocketed in the last two years, but homes have been appreciating for much longer. You may be surprised to learn that home prices have risen for 122 months in a row (see graph below):

As the graph shows, house values have risen steadily over the last ten years. However, the increase has been more dramatic since 2020, as home price growth has accelerated.

So, why have home prices risen so dramatically? It's because there were more buyers than available homes. Because demand was high and supply was low, this imbalance pushed up home prices.

Where Experts Say Home Prices Are Going

While this is useful context, if you're a buyer or seller in today's market, you're probably curious about what will happen to home prices in the future. Will they maintain their current growth rate, or will home prices fall?

Experts are forecasting ongoing appreciation, just at a decelerated pace. In other words, prices will continue to rise, but not as quickly as they have been. The graph below depicts home price projections from seven industry experts. None of them expect prices to fall (see graph below):

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, while housing supply is increasing, it is not enough to cause home prices to fall because there is still a gap between the number of homes for sale and the number of buyers looking to make a purchase.

According to Terry Loebs, founder of the research firm Pulsenomics, most real estate experts and economists expect home prices to rise further. He puts it this way:

“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 predict price deceleration rather than depreciation. This means that house prices will continue to rise, albeit at a slower rate. Let's talk so you can get a full picture of what's going on with home prices in our area and discuss your buying and selling goals.