One of the biggest questions we are getting is from the sellers and the buyers. Are home prices dropping? What’s happening with the housing market? If you look at the headlines in the news, on TV, magazines, and on social media, you will see that people are talking about how home prices are dropping. 

Interest rates have gone up. As a result, this indicates that the housing market is slowing. So what’s the true story here? Our price is dropping. Are we shocked that the price is going up? 

In 2019, the median home price nationwide was about $330,000. In 2021, the median home price nationwide was about $411,000. That’s a significant price increase. That’s what we call appreciation. In fact, a lot of experts are saying that in 2021 we had an appreciation of 15% in just one year, which is unheard of. So that’s an appreciation on your home price, which means if you buy a house for a million dollars and it appreciates at 15%, your house value is $1,150. So in order to understand what’s happening out there in the real estate market, going up or down, stabilizing or crashing, we need to understand three words that are very important in real estate. One is appreciation, the second is depreciation,and the third one is deceleration. So let’s look at those. As you know, if you’re a seller or even if you’re a buyer, you’ve seen the prices go up and up. I would say since 2011 through 2023, prices have gone up an average of 3% or 4% per year. In fact, in 2021, according to CoreLogic prices,just in one year, prices have gone up 15%. That’s a lot of appreciation this year. 

In 2022, they’re saying that prices will go up another 15%. It’s already gone up 10% so far through May and June, and they expect another appreciation, so maybe another 10%, which is almost 30% in just two years. So, since the 2008 crash, the value of some homes has more than doubled or tripled. That is appreciation. The good news is, when there is appreciation, you have a lot of equity in the homes. And when there’s a lot of equity in the homes, there’s a less chance of a crash because there’s a lot of money in there. Even if I sell the home after two years of not having a job, I will have equity in it. Therefore, appreciation is very good for real estate. Of course, that’s not very good for buyers in the short term because they’re paying a higher price. However, in general, owning a property and seeing it appreciate is a sign of a healthy market. And we’ve seen in 2021, 2022, we’re still seeing appreciation. So as far as experts go, or as far as people say, hey, there’s a market crash, prices are dropping as of today, September 1, 2022, at least in Orange County. I personally have not seen a price drop. In fact, I’m still seeing price appreciation. I just wrote three offers for one of the buyers that I have. She’s a single lady. We have written four offers in the last three weeks for condos in the $600,000 to $700,000 range. We were unable to obtain any of them due to the homes, which sold for 20, 30, and 40,000 percent above list price. This is the end of August 2022, and we lost those because there were some cash buyers. One condo sold for $50,000 over list price. So for me personally, I’m not seeing any decrease in price

Let’s look at the second word to understand what’s happening in this real estate market, or if I may rephrase, in this confusing real estate market. Depreciation is when your prices actually go down. When does depreciation happen? Well, usually it happens. Prices fall, resulting in a depreciation. When a house that’s worth a million dollars sells for $900,000 because of a slow market, because it’s taking too long to sell, or because people come in there in 20, 30, 40, 50 buyers, and nobody is writing an offer. So you keep decreasing your price. If you were listed for a million dollars, you would drop it in 30 days to $950,000. If it doesn’t sell, you drop it to $900,000 and eventually it sells for $850,000. As you know, the prices are very high. Inflation is very high, at almost 8%. I would say high, but I have to be careful when I say high because I’ve sold homes at 8%. Right now it’s at 5%. So what I’m going to say is that interest rates are higher than what they used to be a year ago. A year and a half ago, at 2.5%. I sold a house at 2.5% a year and a half ago, fixed rate. I’m closing an escrow today at 4.75%, and I just sold a fourplex in the Palm Springs area at 8%. So I have to be careful what I say, high interest rate or not, because it’s all relative. But in general, rates are high, prices are high, and inflation is high. But homes are still selling on average. According to the National Association of Realtors, homes on average are selling in 14 days. In 2021, they were selling in eight days, which is a very strong market, especially for the sellers. So I don’t see a depreciation in prices because home buyers are still buying. There is a demand; there’s a shortage of homes, so there is no depreciation. Let’s look at the third one, which is the one that you need to understand, and that is deceleration. Deceleration is when home prices still continue to appreciate but at a much slower pace. There is a deceleration happening right now. That doesn’t mean the prices are dropping. And that’s what you have to understand. Whether you’re a seller thinking about selling, whether you’re a buyer or an investor hoping for the price drop, So what’s happening with all these confusing reports from experts and social media talks and newspaper articles? I don’t know how many people read newspapers, but I guess 18% still read newspapers. So those articles are there. So the deceleration is when there is a slow pace of acceleration or appreciation of homes. I’ll give you an example. I sold a house in July. That house was listed for $1.3M and sat on the market for 21 days. Oh, wow. 21 days. Well, it’s more than normal because average homes were selling back then in about ten days in Anaheim Hills.