“For home prices, there are two different methods used to compare home prices over different time periods: year-over-year (Y-O-Y) and month-over-month (M-O-M). Here’s an explanation of each.”
Media coverage about what’s happening with home prices can be confusing. A large part of that is due to the type of data being used and what they’re choosing to draw attention to. For home prices, there are two different methods used to compare home prices over different time periods: year-over-year (Y-O-Y) and month-over-month (M-O-M). Here’s an explanation of each.
Year-over-Year (Y-O-Y):
- This comparison measures the change in home prices from the same month or quarter in the previous year. For example, if you’re comparing Y-O-Y home prices for April 2023, you would compare them to the home prices for April 2022.
- Y-O-Y comparisons focus on changes over a one-year period, providing a more comprehensive view of long-term trends. They are usually useful for evaluating annual growth rates and determining if the market is generally appreciating or depreciating.
Month-over-Month (M-O-M):
- This comparison measures the change in home prices from one month to the next. For instance, if you’re comparing M-O-M home prices for April 2023, you would compare them to the home prices for March 2023.
- Meanwhile, M-O-M comparisons analyze changes within a single month, giving a more immediate snapshot of short-term movements and price fluctuations. They are often used to track immediate shifts in demand and supply, seasonal trends, or the impact of specific events on the housing market.
The key difference between Y-O-Y and M-O-M comparisons lies in the time frame being assessed. Both approaches have their own merits and serve different purposes depending on the specific analysis required.
Why Is This Distinction So Important Right Now?
We’re about to enter a few months when home prices could possibly be lower than they were the same month last year. April, May, and June of 2022 were three of the best months for home prices in the history of the American housing market. Those same months this year might not measure up. That means, the Y-O-Y comparison will probably show values are depreciating. The numbers for April seem to suggest that’s what we’ll see in the months ahead (see graph below):
That’ll generate troubling headlines that say home values are falling. That’ll be accurate on a Y-O-Y basis. And, those headlines will lead many consumers to believe that home values are currently cascading downward.
However, on a closer look at M-O-M home prices, we can see prices have actually been appreciating for the last several months. Those M-O-M numbers more accurately reflect what’s truly happening with home values: after several months of depreciation, it appears we’ve hit bottom and are bouncing back.
Here’s an example of M-O-M home price movements for the last 16 months from the CoreLogic Home Price Insights report (see graph below):
Why Does This Matter to You?
So, if you’re hearing negative headlines about home prices, remember they may not be painting the full picture. For the next few months, we’ll be comparing prices to last year’s record peak, and that may make the Y-O-Y comparison feel more negative. But, if we look at the more immediate, M-O-M trends, we can see home prices are actually on the way back up.
There’s an advantage to buying a home now. You’ll buy at a discount from last year’s price and before prices start to pick up even more momentum. It’s called “buying at the bottom,” and that’s a good thing.
Bottom Line
If you have questions about what’s happening with home prices, or if you’re ready to buy before prices climb higher, let’s connect.
To view original article, visit Keeping Current Matters.
The Cost of a Home Is Far More Important than the Price
Thanks to today’s lower interest rates, even with the price increase, you would still save $61 in your monthly mortgage payments.
Is the Economic Recovery Beating All Projections?
Is the U.S. economy and labor market are recovering from the coronavirus-related downturn more quickly than previously expected?
Homes Across the Country Are Selling Fast
Buyers are actively searching for and purchasing homes at a record-breaking pace.
How Low Inventory May Impact the Housing Market This Fall
Considering selling your house? Let’s talk about how you can benefit from the market trends in our area.
The Surging Real Estate Market Continues to Climb
Though there is some evidence that the overall economic recovery may be slowing, the housing market is still gaining momentum.
Two New Surveys Indicate Urban to Suburban Lean
Americans are feeling less enamored with living in a large city and may be longing for the open spaces in suburban and rural areas.