Are home prices rising or falling? If you’re thinking about selling your house, it’s important to know if the market is working in your favor or not.
The media coverage can be a bit confusing, as two different outlets will put out seemingly conflicting information on the same day. There’s a reason for this, though: Home price trends can be measured in two different ways. Whether home prices are rising or falling depends on how you’re looking at it.
The two different methods used to talk about home price trends are year-over-year (Y-O-Y) and month-over-month (M-O-M). We’ll explain:
Year-Over-Year (Y-O-Y):
Y-O-Y measures how home prices have changed from a certain point in one year to the same point in the next year (so, July 2022 to July 2023, for example). This focus on the change over a one-year period provides a longer-term look at market trends. This way of looking at prices is useful for evaluating long-term changes.
Month-Over-Month (M-O-M):
M-O-M compares one month to the next; for example, June 2023 to July 2023. This short-term look shows what’s happening with prices more immediately. Any short-term price fluctuations will be seen more easily here. This can be used to talk about seasonal trends or how specific events impact the market.
Here’s why the distinction is important right now:
Y-O-Y and M-O-M are both valid ways of tracking home price changes; they just serve different purposes. It’s important to understand how they work differently, especially in situations where short-term trends might not match the long-term changes.
We’re currently in such a situation. April, May, and June of 2022 had historically high home prices; the market was hot and values were up. Since the market isn’t red-hot anymore, prices have fallen from that high. Therefore, on a Y-O-Y basis, prices are falling.
Due to these numbers, you’ll likely see some headlines about falling home values. That’s true on a Y-O-Y basis, but only because we’re comparing to record highs.
When we look at M-O-M home prices nationally using the latest CoreLogic Home Price Insights report, we see that prices have been rising for several months and will likely continue to rise. This is a more informative way of looking at our current market. It shows us that, after months of going down from record highs, we’ve hit a bottom and are bouncing back up. Selma Hepp, Chief Economist for CoreLogic explains: “After peaking in the spring of 2022, annual home price deceleration continued in May. Despite slowing year-over-year price growth, the recent momentum in monthly price gains continues in the face of recent mortgage rates increases.”
What does this mean for you?
When you’re reading headlines about home prices, remember to take a closer look. While prices may be falling on a Y-O-Y basis, they’re trending in a positive direction M-O-M. Buying a home right now, when prices are lower and trending upward, is a smart move. You can buy at a discount from last year and reap the benefits of the price increases to come.
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