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Are Property Values Going Down?

Will the value of my house go down in 2023?  Short answer, value shouldn’t go down anytime soon. While you may need to adjust your home pricing expectations as a seller, it is doubtful you will have to sell below market value.

I have seen the same headlines you have, but let me assure you, the housing market is not about to collapse. When you work with an experienced real estate agent, you can price your home realistically and get what you need.

We have all seen the real estate headlines that talk of home pricing declines. You might be wondering, “Will the value of my home drop?”

News articles designed to gather clicks by forecasting a housing market downturn may make you hesitant to list your home for sale. And with mortgage rates rising, the pool of potential buyers seems to be dwindling, too. When fewer buyers are on the market, sellers might have to adjust home pricing to attract those who remain.  That’s true enough.  . Will this less-than-favorable situation have to include you?

Let’s talk about what is really going on beyond the beyond the sensationalist headlines. 

Why Deceleration in Home Pricing Does Not Mean Depreciation in Home Values

There’s no denying that the overall market situation in 2022 differs from that in 2021. The U.S. real estate market has gone from a year of record-breaking home price growth (the 30-percent and higher home value increases are now legendary) to a decline in home price growth. In fact, according to Redfin, homes have sold for less than asking for the first time since March 2021. 

Does this downward trend in home price growth signal a depreciation in home values? The great news for sellers is that it does not. 

The main difference between home prices and home values is that home prices fluctuate over the short term, depending on economic forecasts and unforeseen circumstances that influence the economy. On the other hand, home values fluctuate much more slowly over longer periods. A home price is the price buyers are willing to pay for a home based on several variables. 

A home value is more stable over time, depending on the size and type of house you have, its condition, and its location. Home values in some areas will be relatively impervious to short-term economic shocks, while less economically stable areas may experience more significant fluctuations during challenging times. 

Hiring an experienced local real estate agent will help you determine how much the current conditions might affect your home price and whether you should sell right now or hold off for a few months.

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Why 2022 Is Not as Bad for Home Pricing as Everyone Thinks

The past three years illustrate this point perfectly. Home prices rose at unprecedented rates during 2021 mainly because no one was selling during the Covid shutdowns of 2020. Pent-up demand for homes combined with a decimated inventory of for-sale listings caused home prices to skyrocket.  There weren’t enough homes to go around which lead to a buyer frenzy.  And with really low interest rates, buyer’s could afford to be in a frenzy.

By contrast, 2022 has been a relatively tough year for the real estate market. The U.S. economy is slowing for a lot of reasons including rising living costs, inflation, and mortgage interest rates.  Higher costs make making housing less accessible to buyers. 

Having said that, we need to put this slowdown into a longer-term perspective. If current real estate market conditions are compared to other years in the past decade rather than the outlier year of 2021, things begin to look less alarming, and actually much more normal.

Home sales went down in 2022, but only 0.9% compared to the average volumes over the past eight years. If we look at data from the National Association of Realtors, 2013 and 2014 were substantially slower years for real estate, while the current levels of home sales are only slightly lower than the 2018-2019 pre-pandemic levels. 

Why are these statistics important? Most importantly it indicates that home demand remains strong despite slowing home value appreciation.  This keep home prices up for a long time to come. It’s crucial to note that home prices are not actually falling if you look at Phoenix as a whole; they are still increasing — just at a slower rate than the outlier 2021 rates. So, while the housing market may be slowing down, it has not entered the much-rumored downturn phase. 

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