Record High Home Prices Amid Shortage
In the 20 biggest U.S. metros, home prices continue to rise, marking an 11th consecutive month of growth and hitting a record high. This surge is happening amidst a significant shortage of resale homes for sale, driving up demand and prices in the housing market.
Steady Growth in Major Metro Markets
The S&P CoreLogic Case-Shiller 20-city house price index revealed a 0.2% increase in December from the previous month. Over the course of the last 12 months leading up to December, home prices in these major U.S. metro areas saw a notable 6.1% uptick. Additionally, the national index, a broader measure of home prices, experienced a similar 0.2% rise in December and a 5.5% increase over the past year. Notably, all these figures are seasonally adjusted, demonstrating a consistent upward trend.
Regional Insights
San Diego emerged as a standout performer in December, with home prices soaring by 8.8% year-over-year. This robust performance was reflective across all 20 major markets, marking the first time since 2023 that yearly gains were seen universally, as reported by S&P.
On the flip side, Portland witnessed the slowest price growth, with an increase of just 0.3%. Despite this, the overall trend indicates a healthy and thriving housing market.
Positive Trends in Home Price Growth
Supporting the Case-Shiller data, a separate report from the Federal Housing Finance Agency highlighted a 0.1% increase in home prices in December compared to the previous month. Moreover, there was a significant 6.6% surge in home prices over the course of the past year, showcasing sustained growth and stability.
The FHA noted that the housing market has been witnessing consistent annual home price growth every quarter since the beginning of 2012, signaling a resilient and enduring market performance.
Median Prices Reach New Heights
In December 2023, the median price for resale homes stood at $382,600, with newly built homes fetching a slightly higher price tag of $413,200. These figures underscore the escalating demand and value appreciation in the housing sector, painting a promising picture for both buyers and sellers in the current market landscape.
Overview of the Housing Market in 2023
Even though rates reached 8% last year, home prices remained resilient, according to the Case-Shiller index. However, recent data suggests that certain markets are beginning to experience declines in home prices.
Potential Boost in Home Prices
As the 30-year rate fell below 7% in December, there is anticipation for an increase in demand which could potentially drive up home prices. Moreover, due to the ongoing shortage of homes for sale, there is a possibility of further upward pressure on home prices.
Insights from S&P
Brian D. Luke, the head of commodities, real & digital assets at S&P Dow Jones Indices, noted that 2023 showed higher-than-average annual home price gains over the past 35 years. While the growth rate did not reach double-digits as in previous years, the above-trend growth is seen as positive given the escalating costs of financing mortgages.
S&P also observed the initial effects of higher rates on home prices, pointing out that increased financing costs led to price declines in the fourth quarter, with 15 markets experiencing reduced property values compared to September.
