The current news about home prices can be confusing, making it hard to understand what's really happening. Some headlines suggest home prices are due for a correction, but what does that actually mean? Let's break it down.

What Does a Correction Mean?

Danielle Hale, Chief Economist at Realtor.com, explains:

"In stock market terms, a correction generally refers to a 10 to 20% drop in prices. . . We don't have the same established definitions in the housing market."

In real estate, a correction doesn't mean a dramatic drop in prices. Instead, it indicates that prices, which have been rising rapidly in recent years, are now stabilizing and growing at a more moderate pace. While prices can vary significantly by local market, a steep national decline isn't what's happening.

The Real Estate Market Is Normalizing

From 2020 to 2022, home prices surged due to high demand, low interest rates, and a shortage of homes for sale. However, such rapid growth couldn't continue indefinitely.

Now, price growth has started to slow, indicating a normalization of the market. Recent data from Case-Shiller shows that after being relatively flat for a few months last year, prices are increasing nationally, but not as quickly as before.

The key takeaway? This year, price growth is more balanced compared to the pandemic frenzy.

What’s Next for Prices?

Looking ahead, experts like Marco Santarelli, Founder of Norada Real Estate Investments, anticipate a moderation in home price growth over the next five years. This means a slower, more sustainable pace of appreciation rather than a dramatic drop in prices.

Supply and demand dynamics will continue to influence prices. With more homes on the market and buyer demand tempered by higher mortgage rates, upward pressure on prices should ease.

What This Means for You

If you're considering buying a home, slower price growth is good news. The rapid price increases during the pandemic priced many potential buyers out of the market. While home values are still expected to rise, the pace will be more manageable. Odeta Kushi, Deputy Chief Economist at First American, notes:

"While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help — so the dream of homeownership isn't boarded up just yet."

Bottom Line

Nationally, home prices are not expected to decline significantly. Most experts predict continued, moderate growth. However, prices vary by local market. That's where a trusted real estate agent comes in. If you have questions about home prices in our area, reach out. Let's discuss what's happening locally.