Home Prices Aren’t Declining, But Headlines Might Make You Think They Are

<article class="post-1082510 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-1082510"><span class="entry-date">June 12, 2024</span><div class="entry-header center-block text-center"><h1 class="entry-title">Home Prices Aren’t Declining, But Headlines Might Make You Think They Are</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Home+Prices+Aren%E2%80%99t+Declining%2C+But+Headlines+Might+Make+You+Think+They+Are&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fhome-prices-arent-declining-but-headlines-might-make-you-think-they-are%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="Home Prices Aren’t Declining, But Headlines Might Make You Think They Are Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20240612-Home-Prices-Aren-t-Declining-But-Headlines-Might-Make-You-Think-They-Are-original.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width=""/>
<p>If you’ve seen the news lately about home sellers slashing prices, it’s a great example of how headlines do more to terrify than clarify. Here’s what’s really happening with prices.</p>
<p>The bottom line is <a href="https://www.simplifyingthemarket.com/2024/05/13/home-prices-are-climbing-in-these-top-cities/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home prices</a> are higher than they were a year ago at this time, and they’re expected to keep rising, just at a slower pace.</p>
<p>But a recent article from <em>Redfin </em>notes,</p>
<blockquote><p><em>“Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand.” </em></p></blockquote>
<p>And that might make you think prices are declining.</p>
<p><span style="color: rgb(51, 51, 51);">Now, while it’s true the latest report from </span><em style="color: rgb(51, 51, 51);">Realtor.com</em><span style="color: rgb(51, 51, 51);"> also shows </span><a href="https://www.realtor.com/research/may-2024-data/" rel="noopener noreferrer" target="_blank">16.6%</a><span style="color: rgb(51, 51, 51);"> of homes on the market had price reductions in May, which is up from 12.7% last May, that doesn’t mean overall home prices are falling. </span></p>
<p><strong>The key is knowing the difference between the asking price and the sold price. </strong></p>
<h4><strong>Understanding Asking Price vs. Sold Price</strong></h4>
<p>In essence, the asking price, also known as a listing price, is the amount a seller hopes to get for their home when they list it. In reality, sellers can’t just put any <a href="https://www.simplifyingthemarket.com/2024/05/24/your-agent-is-the-key-to-pricing-your-house-right-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">price tag</a> on their house and expect it to sell for top dollar. Today’s buyers are savvy customers, and when they aren’t willing to pay a premium for a home because their budgets are strained by higher <a href="https://www.simplifyingthemarket.com/2024/05/02/what-is-going-on-with-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">mortgage rates</a>, sellers need to adjust. And that’s what’s happening right now.</p>
<p>Based on market factors and what offers that seller receives, that asking price can change. If a seller isn’t getting much foot traffic, you may see them revise the price and make an adjustment to reignite interest in the home – and sometimes that’s because they’ve <a href="https://www.simplifyingthemarket.com/2024/04/02/why-overpricing-your-house-can-cost-you/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">overpriced it</a> from the start. That’s where price reductions come in, and when you see <em>“price drops” </em>in a headline, it sounds like declining home prices.</p>
<p>Mike Simonsen, CEO and Founder of <em>Altos Research</em>, <a href="https://www.housingwire.com/articles/unsold-inventory-is-rising-across-the-country/#:~:text=Today%2C%2034.8%25%20of%20homes%20on,each%20week%20than%20last%20year." rel="noopener noreferrer" target="_blank">says</a>:</p>
<blockquote><p><em>“Not only is the share of homes with price cuts elevated compared to one year ago, but more price cuts are happening each week than last year.”</em></p></blockquote>
<p>On the other hand, the final sold price is the amount a buyer actually pays when the transaction is complete.</p>
<p><strong>Here’s the most important thing to note</strong>: <strong>Actual sold prices are </strong><a href="https://www.simplifyingthemarket.com/2024/04/22/what-you-really-need-to-know-about-home-prices-1/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank"><strong>still rising</strong></a><strong>, and they’re expected to continue to do so at least over the </strong><a href="https://www.simplifyingthemarket.com/2024/05/20/whats-next-for-home-prices-and-mortgage-rates/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank"><strong>next 5 years</strong></a><strong>.</strong></p>
<h4><strong>What Does This Mean for Home Prices?</strong></h4>
<p><strong>So, while there’s been an increase in price reductions recently, this doesn’t mean overall home values are declining.</strong> Instead, it’s a sign that demand is moderating. And, as a result, sellers are adjusting their expectations to align with today’s market reality.</p>
<p>Even with more price reductions, home values are still growing on an annual basis, as they do nearly <a href="https://www.simplifyingthemarket.com/2024/03/13/your-home-is-a-powerful-investment/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">every year</a> in the housing market. According to the <em>Federal Housing Finance Agency</em> (FHFA), home prices went up <a href="https://www.fhfa.gov/DataTools/Tools/Pages/House-Price-Index-(HPI).aspx" rel="noopener noreferrer" target="_blank">6.6%</a> over the last year (<em>see below</em>):<a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240610/20240612-Percent-Change-in-Home-Prices-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240610/20240612-Percent-Change-in-Home-Prices-original.png"/></a></p>
<p></p>
<p>This map shows how prices rose just about everywhere in the country, indicating the market is not in decline.</p>
<p>So, while seller price reductions are often a leading indicator that prices may moderate in the months ahead, which experts have been saying for a while is expected to happen, they aren’t necessarily reason for alarm. The same article from <em>Redfin </em>also states:</p>
<blockquote><p><em style="color: black;">“. . .those metrics suggest sale-price growth could soften in the coming months as persistently high mortgage rates turn off homebuyers. For now, the median-home sale price is up 4.3% year over year to another record high. . .”</em></p></blockquote>
<p><span style="color: rgb(51, 51, 51);">And with </span><a href="https://www.simplifyingthemarket.com/2024/05/16/the-number-of-homes-for-sale-is-increasing/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">inventory</a><span style="color: rgb(51, 51, 51);"> as tight as it is today, </span><a href="https://www.simplifyingthemarket.com/2023/11/22/home-prices-still-growing-just-at-a-more-normal-pace/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">price moderation</a><span style="color: rgb(51, 51, 51);"> is much more likely in upcoming months than price declines. </span></p>
<h4><strong>Why This Is Good News for Buyers and Sellers</strong></h4>
<p>For buyers, more realistic asking prices mean a better chance of securing a home at a fair price. It also means you can enter the market with more confidence, knowing prices are stabilizing rather than continuing to skyrocket.</p>
<p>For sellers, understanding the need to adjust your asking price can lead to faster sales and fewer price negotiations. Setting a realistic price from the start can attract more serious buyers and lead to smoother transactions.</p>
<h3>Bottom Line</h3>
<p>While the uptick in price reductions might seem troubling, it’s not a cause for concern. It reflects a market adjusting to new conditions. Home prices are continuing to grow, just at a more moderate pace.</p>
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