Home prices were the talk of the town in 2012, but with that year concluding, what will happen to them as the winter progresses?

Well, it’s Christmas Eve, the time of mistletoe and yuletide and egg nog. But while visions of sugarplums may be dancing in the heads of most people tonight, we’ll be going to sleep with another, equally potent question on our minds: where are home prices heading this winter?

Home prices bottoming earlier this year has been one of the major economic developments since the economic recession began in 2007, and since bottoming in the early spring, home prices have indeed put up some of their best numbers in years. As we reported last week, values in FNC’s Residential Price Index were up 3.7 percent year-over-year for October, and from January to October, they’ve risen 5.1 percent.

Will Home Prices Begin to Slip?

As impressive as home prices have been in 2012 – and they have certainly been impressive, leading the charge towards a housing recovery – there is reason to believe that prices will  decline somewhat in the next couple of months, though as the folks at KCM Blog pointed out, this would not necessarily be the end of the world:

• Some of the heavy players in housing economics, KCM writes, have predicted home prices to soften a bit. Bill McBride over at Calculated Risk, for instance, is predicting home prices to decline month-to-month in the next Case-Shiller report, which is due out this week and will track the home prices of October.
• Similarly, Fiserv is estimating that short-term prices will decline a bit in most of the nation’s housing market.

Home Price Nuance

Two points warrant mention, though: one, those declines will probably be from September to October, and given how strongly housing has progressed from its 2011 lull, there is still a very strong chance that prices will post impressive yearly returns, as FNC’s latest index did; and two, as McBride wrote, even if prices fall a bit month-to-month, it will not be a sign of impending doom! Prices have been behaving in such a schizophrenic manner the last nine-odd years that it’s easy to forget that they naturally rise in the summer when homebuying is strong, and naturally fall in the winter when homebuying is weaker.

So if indeed prices decline a bit in the next month or so, do not fret – it does not mean that the housing recovery is in jeopardy.