Despite lower sales activity, home prices continued their upward trend in October, according to the S&P CoreLogic Case-Shiller Home Price Index. Real estate experts say the performance reflects limited inventory in the country, a problem expected to continue in 2024.
The data released on Tuesday shows that home prices in all nine U.S. census divisions posted a 4.8% annual gain in October, up from a 4% gain in the previous month.
Meanwhile, month-over-month, the index increased 0.6% after seasonal adjustments in October, lower than the 0.7% in the previous month – without adjustments, the increase was 0.2% in October.
U.S. home prices “accelerated at their fastest annual rate of the year in October,” Brian D. Luke, head of commodities, real & digital assets at S&P DJI, said in a statement.
“Our National Composite rose by 0.2% in October, marking nine consecutive monthly gains and the strongest national growth rate since 2022,” Luke said.
CoreLogic Chief Economist Selma Hepp said the index has increased by 7% since the beginning of the year. Ultimately, “home prices are 1% higher than at the peak in 2022, recovering all losses recorded in the second half of 2022.”
Danielle Hale, Realtor.com chief economist, added that the current index data tracks a period through which mortgage rates climbed sharply from 6.9% in August to 7.8% by the end of October.
“Existing home sales fell to a new 13-year low in October, as soaring mortgage rates cut into purchasing power for many buyers. Shoppers who could successfully navigate rising costs were likely well-qualified, and amid limited inventory and a sense that mortgage rates might continue to rise, pushed home prices higher.”
Regional markets
Detroit had the highest gain in October, with home prices increasing 8.1% compared to the previous year. It was followed by San Diego, with a 7.2% gain, and New York, where home prices were up 7.1%.
The data shows that eight of 20 cities registered all-time highs: Miami, Atlanta, Chicago, Boston, Detroit, Charlotte, New York and Cleveland.
Portland saw a 0.6% decline, making it the only city to report lower prices in October compared to the same month last year. Meanwhile, Phoenix and Las Vegas have flipped to year-over-year gains, registering 0.92% and 0.14% gains, respectively.
“We are experiencing broad-based home price appreciation across the country, with steady gains seen in nineteen of twenty cities. This month’s report reflects trendline growth compared to historical returns and little disparity among cities and regions,” Luke said.
Luke explained that the “Midwest and the Northeast region are fastest growing markets, while the Southwest and West regions have lagged other regions for over a year.”
The data released for October shows that 11 of the 20 major metro markets reported month-over-month price increases.
The months ahead
Hepp said, “With mortgage rates dropping, demand for homes in early 2024 is likely to be strong and will again put pressure on prices, similar to trends observed in early 2023,” Hepp said.
“Given the stronger seasonal gains seen in early 2023, annual home price appreciation should accelerate this winter before slowing again next year. Still, most markets will continue to reach new home price highs over the course of 2024,” Hepp said.
Luke agrees that “Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher.”
“With mortgage rates easing and the Federal Reserve guiding toward a slightly more accommodative stance, homeowners may be poised to see more appreciation.”
