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Understanding the Difference between Softening and Falling Home Prices

Monday, October 1, 2018   /   by June Quilantang

Understanding the Difference between Softening and Falling Home Prices

For the sake of views and likes, some writers will intentionally use words that they think would make their headlines look more appealing despite of the fact that the thought and idea change greatly with it, misleading leading readers and netizens alike.

Many of these headline writers will confuse ''softening home prices'' with ''falling home prices,'' but there is a major difference between the two.

The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices). This does NOT mean that prices are depreciating (falling prices).

Here is an example: Over the last several years, national home values increased by more than 6% annually. If you had a home worth $300,000 at the beginning of the year, it would be worth $318,000 by year's end. If the appreciation rate "falls" to 4%, that $300,000 house would be worth $312,000 at the end of next year - a $6,000 difference.

The price of the home did not fall. It just didn't increase at the level it had the previous year. Appreciation rates are projected to end this year at approximately 5%, and then drop to somewhere between 4-5% next year.

This drop in appreciation rate will cause home price increases to soften. Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.

Be careful when reading headlines that discuss home values. Some headline writers will be legitimately confused and will use the word falling in place of softening.

Others will realize that the headline "Home Prices are Falling!" will get more clicks than "Home Prices are Softening" and will intentionally write the more compelling headline.

Reference: https://bit.ly/2Qoon9c?


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The data relating to real estate for sale or lease on this web site comes in part from MHMLS. Real estate listings held by brokerage firms other than eXp Realty - New York Real Estate Experts are marked with the MHMLS logo or an abbreviated logo and detailed information about them includes the name of the listing broker. The information appearing herein has not been verified by the Mid-Hudson Multiple Listing Service, Inc. or by any individual(s) who may be affiliated with said entity, all of whom hereby collectively and severally disclaim any and all responsibility for the accuracy of the information appearing at this web site, at any time or from time to time. All such information should be independently verified by the recipient of such data. This data is not warranted for any purpose. ©2020 Mid-Hudson Multiple Listing Service, Inc. All rights reserved.