The Difference Between Home Price Deceleration and Depreciation

The real estate world uses a number of different terms to describe different aspects that are going on in the market currently. In some ways, it can feel like real estate has its own language.

You may have heard the term recently home price deceleration and might have thought that this means the same as depreciation. it is understandable because they sound very similar. This could have some homeowners concerned that they are headed for a negative impact on homeownership.

It is good to know three commonly used real estate terms, to better understand what experts are currently talking about when they mention market deceleration. Those three terms are:

Appreciation– appreciation is used to refer to an increase in home prices. Over the last couple of years, we have seen record home price appreciation since just the beginning of the pandemic.
Depreciation– depreciation is used to describe home prices decreasing and properties taking on a lesser value
Deceleration– this is a term used in the real estate world that is not often heard among the masses and it is used to describe a point in time where home prices are appreciating but they have come to a slower pace than in the recent past.

Let’s take a look at where home prices have gone in the last few years

As mentioned above it is no breaking news that home prices have inflated significantly over the past two years and much more than many people might have expected. The fact is that home prices were on the rise well before the pandemic when we saw shockingly fast increases or appreciation. Numbers show that home prices have been increasing for the last 122 consecutive months or roughly the last 10 years.

Since 2020 the rate of appreciation has been more dramatic leading people to believe that price increases or brought on by the pandemic alone and understandably forgetting about home price appreciation prior to then.

Why have prices appreciated at such a rapid pace over the last couple of years?

A huge driving force to this was unbelievably low mortgage interest rates that brought a number of buyers flooding into the market coupled with a very low amount of homeowners putting their homes up for sale due to the uncertainty in the economy the pandemic brought.

Where are home prices expected to go in the near future?

It can be helpful to know how home prices have increased over the last decade. But what most homeowners are focused on, or homebuyers for that matter, is where home prices are expected to go moving forward. Many people are concerned that there is a looming crash or the possibility of homes depreciating.

Real estate market experts are predicting that we will continue to see home prices appreciate. What they are expecting is for home price appreciation to be at a decelerated pace. This term of deceleration has been mistaken for depreciation and has scared some consumers as far as real estate is concerned.

Again, the term deceleration means a slower pace of increasing prices. This is still good news if you are an overwhelmed hopeful home buyer as this means that homes will not increase by thousands of dollars overnight. It is also good news for homeowners as it definitely is not a forecast for homes to depreciate in value.

There has been an increase in homes for sale coming to the market which is also good news for buyers, but this increase in inventory is not going to cause such a large impact on home prices that they will go down.

For more information on Home Price Deceleration and Depreciation and all San Tan Valley real estate, and surrounding areas please contact us anytime.