In April, home prices in the United States increased for the third consecutive month, as reported by the S&P CoreLogic Case-Shiller US National Home Price Index. The national index rose 0.5% in April from March after seasonal adjustment. The 10-City and 20-City composites also saw increases of 1% and 0.9%, respectively. Before seasonal adjustments, the national index rose 1.3% from March, breaking a seven-month streak of month-over-month declines that started in June 2022.
“The US housing market continued to strengthen in April 2023,” according to Craig Lazzara, Managing Director at S&P DJI. Lazzara stated that April’s data would support the argument that the decline in home prices from June 2022 had ended in January 2023. The recovery is widespread, with prices rising in all 20 major cities tracked by the index on a non-seasonally adjusted basis. When looking at seasonally adjusted data, all cities rose except for Phoenix, which saw a slight decrease.
Lazzara emphasized that future support for this view would depend on the housing market’s ability to navigate challenges such as mortgage rates and the potential for economic weakness.
According to data released by Freddie Mac, the 30-year fixed-rate mortgage averaged 6.67% for the week ending June 22.
However, on an annual basis, home prices fell by 0.2% – the first annual drop since 2012, according to the S&P report.
A year ago, home prices were experiencing rapid annual gains, with three consecutive months of over 20% increases. This surge reached its peak in June 2022.
However, the housing market experienced a significant transition during this time. In March 2022, the Federal Reserve began a series of 10 consecutive interest rate hikes, which had a cooling effect on the housing market and other rate-sensitive industries in an attempt to combat high inflation.
Low inventory
Although mortgage rates have risen since last year, prices remain strong due to limited options for buyers. The low housing inventory leads to competition and drives prices up.
The May home price index supports the idea that prices are responsive to changes in interest rates. Home shoppers continue to push their budget boundaries in today’s expensive housing market. Danielle Hale, Realtor.com’s chief economist, stated that high mortgage rates have prevented 1 in 7 homeowners from selling, resulting in significantly fewer new listings compared to previous years. This shortage of supply forces buyers to make competitive offers, even though home sales are 20% lower than the previous year.
Hale predicts a gradual cooling of prices as affordability becomes a more significant factor in the market, according to a revised forecast for the rest of 2023 from Realtor.com. However, she acknowledges that price trends will vary across different markets.
The S&P report reveals that Miami saw the largest year-over-year increase in home prices at 5.2%. Other cities with notable increases include Chicago, up 4.1%, and Atlanta, up 3.5%. On the other hand, Seattle experienced the largest year-over-year decline, down 12.4%, followed by San Francisco, down 11.1%, and Las Vegas, down 6.6%.
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