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Understanding Home Price Trends: Year-over-Year vs. Month-over-Month
Dated: June 13 2023
Navigating the media coverage on home prices can be bewildering. Often, the confusion arises from the different types of data used and the aspects they choose to highlight. When it comes to comparing home prices over time, two methods are commonly employed: Year-over-Year (Y-O-Y) and Month-over-Month (M-O-M). In this article, we will shed light on each approach to help you gain a clearer understanding.
Y-O-Y comparisons involve assessing the change in home prices between the same month or quarter of the current year and the previous year. For example, to compare Y-O-Y home prices for April 2023, we would examine the prices for April 2022. This method offers a comprehensive view of long-term trends by focusing on changes over a one-year period. It proves particularly useful in evaluating annual growth rates and determining whether the market is generally appreciating or depreciating.
M-O-M comparisons, on the other hand, analyze the change in home prices from one month to the next. For instance, if we compare M-O-M home prices for April 2023, we would compare them to the prices from March 2023. This approach provides a more immediate snapshot of short-term movements and price fluctuations within a single month. M-O-M comparisons are often employed to track immediate shifts in demand and supply, seasonal trends, or the impact of specific events on the housing market.
The Distinction's Significance
Understanding the distinction between Y-O-Y and M-O-M comparisons is crucial, especially in the current market climate. In the months ahead, home prices might be lower compared to the same months last year. April, May, and June of 2022 witnessed historically high home prices in the American housing market. However, this year's figures may not match up, potentially leading to a Y-O-Y comparison that shows a depreciation in values. The ensuing headlines might erroneously suggest a cascading decline in home values.
A Closer Look at M-O-M Home Prices
Taking a closer look at M-O-M home prices reveals a different story. In reality, prices have been appreciating over the past few months. These M-O-M numbers provide a more accurate reflection of the current state of home values. After a period of depreciation, it seems we have reached a bottom and are now bouncing back.
The Relevance to You
Therefore, if you come across negative headlines about home prices, remember that they may not present the complete picture. In the upcoming months, prices will be compared to the record peaks of last year, potentially resulting in a more negative Y-O-Y comparison. However, observing the more immediate M-O-M trends unveils a positive trajectory in home prices.
This presents an advantageous opportunity for homebuyers. By purchasing a home now, you can benefit from a discount compared to last year's prices and position yourself favorably before prices gain further momentum. This concept is commonly referred to as "buying at the bottom," and it can be highly advantageous.
If you have any inquiries about the current state of home prices or if you're ready to buy before prices rise further, don't hesitate to connect with us. We are here to provide you with the information and assistance you need to make informed decisions in the real estate market.
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