Scratching your head over home price news? We’re here to help.
Media coverage about what’s happening with home prices can be confusing. A large part of that is due to the type of data being used and what they’re choosing to draw attention to. There are two different methods used to compare home prices over different time periods: year-over-year (Y-O-Y) and month-over-month (M-O-M). Here’s an explanation of each.
- This comparison measures the change in home prices from the same month or quarter in the previous year. For example, if you’re comparing Y-O-Y home prices for April 2023, you would compare them to the home prices for April 2022.
- Y-O-Y comparisons focus on changes over a one-year period, providing a more comprehensive view of long-term trends. They are usually useful for evaluating annual growth rates and determining if the market is generally appreciating or depreciating.
- This comparison measures the change in home prices from one month to the next. For instance, if you’re comparing M-O-M home prices for April 2023, you would compare them to the home prices for March 2023.
- Meanwhile, M-O-M comparisons analyze changes within a single month, giving a more immediate snapshot of short-term movements and price fluctuations. They are often used to track immediate shifts in demand and supply, seasonal trends, or the impact of specific events on the housing market.
The key difference between Y-O-Y and M-O-M comparisons lies in the time frame being assessed. Both approaches have their own merits and serve different purposes depending on the specific analysis required.
Why Is This Distinction So Important Right Now?
We’re about to enter a few months when national home prices could possibly be lower than they were the same month last year. April, May, and June of 2022 were three of the best months for home prices in the history of the American housing market. Those same months this year might not measure up. That means, the Y-O-Y comparison will probably show values are depreciating. The country-wide numbers for April seem to suggest that’s what we’ll see in the months ahead (see graph below):
That may generate troubling headlines that say home values are falling, which may be accurate on a Y-O-Y basis. And, those headlines may lead many consumers to believe that home values are currently cascading downward.
However, on a closer look at national M-O-M home prices, we can see prices have actually been appreciating for the last several months. Those M-O-M numbers more accurately reflect what’s truly happening with home values: after several months of depreciation, it appears we’ve hit bottom and are bouncing back.
Here’s an example of national M-O-M home price movements for the last 16 months from the CoreLogic Home Price Insights report (see graph below):
Why Does This Matter to You?
If you’re hearing negative headlines about home prices, remember they may not be painting the full picture, especially at the local level. For the next few months, headlines will be comparing national prices to last year’s record peak, and that may make the Y-O-Y comparison feel more negative. But, if we look at the more immediate, M-O-M trends, we can see home prices are actually on the way back up. Locally, expect to see prices continue to rise due to demand and our relatively low inventory.
National headlines don’t tell the story about the local market. If you have questions about what’s happening with home prices, reach out to us! We love to share our market knowledge to help you make sense of what’s happening here in the Charleston area.
Lauren | Lauren Zurilla & Associates
Read the Original Article Here: Are Home Prices Going Up or Down? That Depends…