Home prices are falling! (And it's completely normal.)
Buyers can take advantage of declining rates during a housing market valley
You’re about to see headlines trumpeting the fall of home prices—and it’s completely normal. Coverage like this, every year, makes some sellers nervous: did you miss your chance? Is this the crash? It makes some buyers even more cautious: what if there’s nowhere to go but down? If you’ve been waiting for prices to drop, the good news is that mid-winter is your time to shine! The bad news for the deal hunter is that this is true every year.
Home price appreciation is not linear! At the start of each year, the market is quiet coming off the holiday season, setting the stage for headlines about falling prices and revving the engines of wishful thinking. By the second quarter, sales historically pick up, and a swing of tens of thousands of dollars in average sale price is the result. Even in 2020!
Average single family sale price in MA
2018 Q1: $461,561 | Q2: $518,763 | +$57,202
2019 Q1: $480,014 | Q2: $534,716 | +$54,702
2020 Q1: $506,790 | Q2: $556,780 | +$49,990
2021 Q1: $600,904 | Q2: $690,548 | +$89,644
2022 Q1: $658,114 | Q2: $773,093 | +$114,979
2023 Q1: $683,043 | Q2: $788,363 | +$105,320
The challenge is that by the time the headlines are touting falling prices, using Q4 data, we're likely to see things already picking up for spring, especially if interest rates continue moving down. Buyers just getting started in March risk thinking they'll be getting a deal, and being blindsided by stiff competition.
Real estate appraisers will also be using lagging market data; they can’t use a sale that has not yet closed, even if it would be more representative of the market at the moment. A low appraisal now reflects the slow market of recent months, but it doesn’t mean the property isn’t “worth it” and might not appraise at or above offer price by next quarter. Trust your numbers, above all: are you comfortable at that price and monthly payment for the long haul? With rates sliding down a bit, the answer might be yes.
Consider the same data, comparing the Q3 to Q4 change—and remembering that it’s that shift that will be fueling January and February headlines, and appraisals through the early part of the year:
Average single family sale price in MA
2018 Q3: $512,396 | Q4: $491,471 | -$20,925
2019 Q3: $529,236 | Q4: $504,124 | -$25,112
2020 Q3: $608,473 | Q4: $596,051 | -$12,422
2021 Q3: $684,033 | Q4: $651,439 | -$32,594
2022 Q3: $742,978 | Q4: $679,390 | -$63,588
Timing the market is a fool's errand, except when it comes to normal seasonal shifts. Sellers shouldn't sell in December or January if they don't have to, but buyers should buy NOW if they want to spend less. (Roughly 13% less, on average!)
Remember: publicly available sales data lags market conditions. "Recently sold near you" comps are, at best, pulling from properties that hit the market weeks ago, many cases months. In the spring especially, things change fast, and the only way to stay on top of things is to be writing offers and getting feedback, or to work with a professional who is actively offering and listing every week.
No matter your holiday plans, now is the time to get started if you're thinking of selling or buying (or both!) in 2024. Save a little bandwidth for some first steps this season, and they can pay off in actual dollars and cents.