Home prices hit record levels on the S&P CoreLogic Case-Shiller U.S. National Home Price Index amid rising mortgage rates.
Data released Tuesday showed that the three-month moving average through June showed prices nationwide were 5.4% higher than June 2023. While it was the highest on record for the index, the annual increase was smaller than May’s 5.9%.
The composite index for the 10 cities that make up the index rose 7.4% year-on-year, down from a 7.8% increase in the previous month, while the composite index for the 20 cities rose 6.5% year-on-year, down from a 6.9% increase in May.
“While home prices and inflation are both slowing, the gap between the two is wider than historical norms, with national indexes outperforming the Consumer Price Index by an average of 2.8%,” Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said in a statement. “This is one percentage point above the 50-year average. Before considering inflation, home prices have risen more than 1,100% since 1974, but are more than double (111%) when inflation is taken into account.”
New York had the highest annualized increase of the 20 cities, with prices up 9% in June, followed by San Diego and Las Vegas, with annual increases of 8.7% and 8.5%, respectively. Portland, Oregon, saw its annualized price increase of just 0.8% in June, the lowest among the top cities.
Because housing affordability has been a hot topic during this election cycle, this month’s report also breaks down home prices by price range, dividing each metro market into three tiers. Looking only at the largest markets over the past five years, we find that in 75% of our study markets, the lower end has risen faster than the overall market.
“For example, low-rise home prices in the Atlanta market are rising 18% faster than mid-rise and high-rise home prices,” Luke said in a press release.
“New York City’s low-rise homes have performed the best over the past five years, increasing nearly 20 percent more than the New York region as a whole,” he continued. “New York City has the largest price differential between low-rise and high-rise homes. Conversely, San Diego has seen the largest price increase in high-rise homes over the past five years.”
Prices across the San Diego market have increased 72% over the past five years, but prices at the higher end have increased 79% while prices at the lower end have increased 63%.
The price increases came despite mortgage rates rising sharply during the April-June period that the index averages. Typically, when interest rates rise, prices fall.
According to Mortgage News Daily, the average 30-year fixed rate started the month of April just below 7% and jumped to 7.5% by the end of the month. Rates stayed above 7% before dropping back below that level in July. The 30-year fixed rate is currently around 6.5%.
“Mortgage rates have fallen since June, but there’s evidence that even lower rates aren’t enough to lure homebuyers back into the market,” said Lisa Sturtevant, chief economist at Bright MLS. “Some buyers are waiting for home prices to fall, not just interest rates.”
Home prices are expected to decline month by month as we move into autumn, but seasonal factors and increased inventory on the market mean prices are unlikely to fall significantly and are still expected to remain higher than last fall.
