Home prices continued to rise in December

S&P Case-Shiller Report: Home Prices Rise Despite Challenges in Late 2023

Home prices in the U.S. continued to climb in late 2023, with the S&P CoreLogic Case-Shiller U.S. National Home Price Index posting a 5.5% annual gain in December, an increase from the 5.1% gain seen in November. According to the latest report, this marks the first time in 2023 that all 20 major markets reported yearly gains, with four cities experiencing over 8% growth.

The U.S. National Index, along with the 20-City Composite and the 10-City Composite, also recorded month-over-month increases of 0.2% after seasonal adjustments.

Key Factors Driving Home Price Growth

Despite significant headwinds in the fourth quarter of 2023, the S&P Case-Shiller Home Price Indices continued its streak of seven consecutive record highs. Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, commented, “Ten of 20 markets beat prior records, with San Diego registering an 8.8% gain and Las Vegas as the fastest rising market in December, after accounting for seasonal impacts.”

Regional Insights

San Diego led the 20 cities with an 8.8% increase in home prices in December. Los Angeles and Detroit followed with 8.3% gains, while Chicago saw an 8.1% increase. On the other end, Portland posted the smallest growth at just 0.3% this month. Regionally, the Midwest and Northeast posted the strongest home-price performances, suggesting that buyers were seeking affordability near strong economic centers.

According to Hannah Jones, a senior economic research analyst at Realtor.com, these regions have experienced substantial price growth over the last year due to sustained demand, taxing the available inventory, and driving up home prices and rents. This trend is consistent with the observation that eager buyers flocked to the housing market to take advantage of lower mortgage rates.

The Impact of Mortgage Rates

The period covered by the latest data—October through December 2023—saw mortgage rates fall sharply from 7.8% in late October to 6.6% by the end of December. However, mortgage rates stabilized in January before climbing back towards 7% in recent weeks, signaling continued challenges for the housing market.

Selma Hepp, chief economist at CoreLogic, highlighted that while the S&P CoreLogic Case-Shiller Index shows the resilience of home prices against rising borrowing costs, it also underscores the headwinds faced by the housing market, particularly elevated mortgage rates and a lack of inventory for existing homes.

Despite these challenges, Hepp noted, “As the recent surge in mortgage application data has shown following a drop in rates, buyers are anxiously waiting to jump into the market as soon as mortgage rates fall. That means that 2024 will show another year of home price highs.”

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