Why Price Drops and More Inventory Are Completely Normal This Time of Year
webadmin • October 23, 2023
Why Price Drops and More Inventory Are Completely Normal This Time of Year
Over the last week, there has been an increase in the number of news articles and talking heads warning that major home price declines are on the horizon.
This negativity is largely in response to the release of Zillow's September 2023 Market Report . The report shows that typical U.S. home values fell 0.1% from August to September – the first month-over-month decline since February.
Despite what you may be hearing in the news, nationally, home prices aren’t falling. It’s just that price growth is beginning to normalize - and this happens every single year.
Here’s the context you need to really understand that trend.
Seasonality in real estate refers to the natural fluctuations in the real estate market that occur at different times of the year.
Every year, transactions and prices tend to be above-trend in the summer while activity typically slows down in the winter. Seasonality plays an important role in the housing market since it has an impact on supply and demand.
During winter and the holiday season in particular, demand tends to slow because people are unlikely to want to move. Aside from colder and more unpredictable weather, people are also dealing with end-of-year deadlines, family obligations, taking time off for the holidays, and more. In the summer, on the other hand, real estate activity tends to increase. Families will often wait until the end of the school year when there’s more free time to move, so they don’t have to uproot their kids in the middle of the year.
The chart below from jpking.com shows Total Home Sales and Median Home Sale Price from June 2013 - June 2021, and it illustrates that this ebb and flow always plays out with remarkable consistency.
This negativity is largely in response to the release of Zillow's September 2023 Market Report . The report shows that typical U.S. home values fell 0.1% from August to September – the first month-over-month decline since February.
Despite what you may be hearing in the news, nationally, home prices aren’t falling. It’s just that price growth is beginning to normalize - and this happens every single year.
Here’s the context you need to really understand that trend.
What is Seasonality in the Housing Market?
Every year, transactions and prices tend to be above-trend in the summer while activity typically slows down in the winter. Seasonality plays an important role in the housing market since it has an impact on supply and demand.
During winter and the holiday season in particular, demand tends to slow because people are unlikely to want to move. Aside from colder and more unpredictable weather, people are also dealing with end-of-year deadlines, family obligations, taking time off for the holidays, and more. In the summer, on the other hand, real estate activity tends to increase. Families will often wait until the end of the school year when there’s more free time to move, so they don’t have to uproot their kids in the middle of the year.
The chart below from jpking.com shows Total Home Sales and Median Home Sale Price from June 2013 - June 2021, and it illustrates that this ebb and flow always plays out with remarkable consistency.
The graph below uses data from
Case-Shiller
to show typical monthly home price movement from 1973 through 2022 (not
adjusted
, so you can see the seasonality):
As the data shows, at the beginning of the year, home prices grow, but not as much as they do in the spring and summer markets. As the market transitions into the peak homebuying season in the spring, activity ramps up, and home prices go up a lot more in response. Then, as fall and winter approach, activity eases again. Price growth slows, but still typically appreciates.
After several unusual ‘unicorn’ years, today’s higher mortgage rates helped usher in the first signs of the return of seasonality but muting homebuyer and seller activity. CoreLogic explains this in their September 2023 US Home Price Insights :
“High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.”
In the coming months, you’re going to see the media talk more about home prices. In their coverage, you’ll likely see industry terms like these:
Don’t let the terminology confuse you or let any misleading headlines cause any unnecessary fear. The rapid pace of home price growth the market saw in recent years was unsustainable. It had to slow down at some point and that’s what we’re starting to see – deceleration of appreciation, not depreciation.
Even with the slowdown in the market, home values are still up considerably for the year. Depending on which report you look at, we are still on track to see between 5 and 8% cumulative appreciation for 2023.
After several unusual ‘unicorn’ years, today’s higher mortgage rates helped usher in the first signs of the return of seasonality but muting homebuyer and seller activity. CoreLogic explains this in their September 2023 US Home Price Insights :
“High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations.”
Why This Is So Important to Understand
- Appreciation: when prices increase.
- Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
- Depreciation: when prices decrease.
Don’t let the terminology confuse you or let any misleading headlines cause any unnecessary fear. The rapid pace of home price growth the market saw in recent years was unsustainable. It had to slow down at some point and that’s what we’re starting to see – deceleration of appreciation, not depreciation.
Even with the slowdown in the market, home values are still up considerably for the year. Depending on which report you look at, we are still on track to see between 5 and 8% cumulative appreciation for 2023.
Remember, it’s normal to see home price growth slow down as the year goes on. And that definitely doesn’t mean home prices are falling. They’re just rising at a more moderate pace.
What does this mean for you? If you can afford it, now is a great time to buy. The chances are very high that you will be able to get a great deal on a home and more favorable terms on your mortgage if you buy within the next few months. Once winter is over and we start to see some improvement in rates, competition will increase and prices will go up again.
Remember, wealth is not created by timing the market – it’s created by time IN the market. The sooner you buy a home, the sooner you will start building equity and be one step closer to financial freedom.
Bottom Line
While the headlines are generating fear and confusion on what’s happening with home prices, the truth is simple. Home price appreciation is returning to normal seasonality.What does this mean for you? If you can afford it, now is a great time to buy. The chances are very high that you will be able to get a great deal on a home and more favorable terms on your mortgage if you buy within the next few months. Once winter is over and we start to see some improvement in rates, competition will increase and prices will go up again.
Remember, wealth is not created by timing the market – it’s created by time IN the market. The sooner you buy a home, the sooner you will start building equity and be one step closer to financial freedom.
Here at Luminate Home Loans, we’re always looking for ways to offer more value to our clients and partners. That’s why we’re thrilled to announce that we’re now a wholly owned subsidiary of Luminate Bank®—and soon, we’ll officially transition under the Luminate Bank® name.
For years, homebuyers have been hoping for a return to the ultra-low mortgage rates seen during the pandemic. But as we move through 2025, it’s becoming increasingly clear that today’s rates—hovering between 6% and 8%—aren’t going anywhere.
Luminate Bank® Welcomes Josh Eifert as Chief Financial Officer, Honoring Legacy of Dave Turk [Minneapolis, Minn.] – [2/4/2025] – Luminate Bank® is proud to announce the appointment of Josh Eifert as its new Chief Financial Officer, succeeding Dave Turk, who has played a pivotal role in shaping the company's strong financial foundation. Josh brings a wealth of experience and strategic vision to Luminate Bank, with 26 years in the banking industry. Most recently, Josh served as CFO at Tradition Capital Bank in Edina, Minnesota, where he led the financial strategy during its remarkable growth from $300 million to more than $2.5 billion in total assets. Before his tenure as CFO, Josh contributed to Tradition Capital Bank in other key financial roles. He began his career with Norwest and Wells Fargo Banks, gaining extensive expertise in financial and operational capacities. Luminate Bank's leadership transition reflects the company's thoughtful succession planning, ensuring its financial strategies remain robust and forward focused. Under the leadership of Dave Turk, Luminate Bank has built an exceptional financial infrastructure, delivering consistent results and creating a foundation that positions the company for continued success. Luminate Bank's CEO, Marc Campbell, shared his confidence in the appointment: "Josh not only brings exceptional financial acumen and strategic insight to Luminate Bank, but he also embodies the principles that define our organization: integrity, innovation, and a steadfast commitment to excellence," Luminate Bank's CEO, Marc Campbell, shared with confidence. "His leadership will ensure our financial strategies succeed and inspire confidence across all who depend on us." "I am honored to join Luminate Bank at such an exciting time. The company's remarkable history of financial excellence and its forward-thinking approach align perfectly with my values and vision," stated Josh Eifert. "I look forward to collaborating with the talented leadership team to build on this strong foundation and drive continued success for our customers, employees, and stakeholders." Josh graduated from the University of Minnesota with a degree in finance and completed the Graduate School of Banking at Colorado. CEO Marc Campbell expressed gratitude for retiring CFO Dave Turk's contributions, saying, "Dave has been instrumental in positioning Luminate as a financial leader. His dedication, insight, and stewardship will always be a part of our company's legacy." Josh Eifert will officially assume his role on February 18, 2025. About Luminate Bank® At Luminate Bank, We Open Doors—empowering individuals and families to achieve their financial dreams through personalized service and innovative digital solutions. As a nationwide bank headquartered in Minneapolis, Minnesota, we are committed to helping our clients meet their financial goals with a blend of modern technology, traditional values, and the trusted guidance of experienced professionals. Known for our exceptional commitment to customers, we take pride in delivering a seamless, supportive experience for every step of the journey. Our dedicated mortgage division has branches and a team of loan originators across the US, making expert home financing solutions accessible to communities nationwide. Luminate Bank is committed to safeguarding your money and accounts with FDIC insurance coverage up to applicable limits. Learn more about how we can open doors for you at www.luminate.bank , follow us on Instagram, LinkedIn, and Facebook, or call (952) 939-7200. For media inquiries, please contact: Debbie Schwake, CMO debbie.schwake@luminate.bank
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