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Home prices reached a new record high in early 2024.
Nationwide, home prices rose 6% in January from a year earlier, according to the latest S&P CoreLogic Case-Shiller Home Price Index released on Tuesday. That was the biggest year-over-year increase since November 2022.
“U.S. home prices continued their drive higher,” Brian D. Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said in a statement. “Homeowners most likely saw healthy gains in the last year, no matter what city you were in, or if it was in an expensive or inexpensive neighborhood.”
Prices jumped 7.4% year over year in January in the 10 largest metros tracked by the index. They were up 6.6% in the 20 largest metros. On a seasonally adjusted basis, home prices continued to break through the all-time highs reached last year.
“Moving into the spring, buyers and sellers alike are looking for ways to seize any opportunity today’s challenging market offers,” said Realtor.com® senior economic research analyst Hannah Jones in a statement. “Buyers face still-high prices and mortgage rates, as well as historically low inventory levels, but for-sale options are improving and are expected to continue to climb seasonally through the spring and summer.”
Despite the healthy annual gains in home prices, the monthly gains were more modest. That could signal a looming moderation in price growth if the trend continues.
From December to January, price growth was just 0.4% nationally, 0.1% for the 10-city index, and 0.2% for the 20-city index, according to the report.
“If the trend continues we could see prices start to fall, though unfortunately we’re a year away from seeing home prices drop nationwide, in the best case,” Robert Frick, corporate economist with Navy Federal Credit Union, said in a statement.
“Low home inventories coupled with pent-up demand could push up prices, so lower home prices are far from certain,” Frick added.
Where are home prices rising the fastest?
San Diego, CA
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Among the 20 largest metros tracked by Case-Shiller, San Diego again reported the highest year-over-year home price gain. It notched an 11.2% increase in January.
Los Angeles followed with an increase of 8.6%. Detroit came in third with a gain of 8.2%, trailed by Charlotte, NC, at 8.1%, and Chicago, at 8%.
Sitting at the bottom of the annual growth list is Portland, OR. However, Portland still eked out an annual price increase of 0.9%.
“While there is a large disparity between leaders such as San Diego versus laggards such as with Portland, the broad market performance is tightly bunched up,” Luke said,
Higher mortgage rates are weighing on homebuyers
The slowing monthly price gains may reflect the impact of higher mortgage rates, which have weighed on the purchasing power of prospective buyers. Faced with higher mortgage payments, some buyers have sought out smaller and more affordable homes.
Rates for a 30-year fixed mortgage averaged 6.64% in January, according to Freddie Mac. That was down from the recent peak monthly average of 7.62% seen in October, but still more than double the rates seen before the Federal Reserve began its rate hikes two years ago.
“On a monthly basis, home prices continue to struggle in the face of elevated borrowing costs,” Luke said. “Seventeen markets dropped over the last month, while Minneapolis has posted a 2.4% decline over the prior three months.”
Only Southern California and Washington, DC, have stood up to the rising wave of mortgage rates and delivered positive monthly returns to start the year, Luke noted.
“While elevated mortgage rates continued to freeze housing market activity over the winter, an unthawing is in sight, with improvements in for-sale inventory offering more opportunities for potential buyers across the country,” says Selma Hepp, chief economist at CoreLogic. “More inventory is a welcome development and suggests that some normalization in the U.S. housing market lies ahead.”
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