Economists have recently estimated that home prices in the United States rose above year-ago levels in July, marking the first increase in five months. More current data suggests that this positive trend has continued into the following month.
One of the most closely watched indicators of home prices, the S&P CoreLogic Case-Shiller home price indices, is set to be released on Tuesday morning. Economists are anticipating a 0.3% increase in home prices across 20 major metropolitan areas in July compared to the previous year. This would be the first gain since February. Data from June, the most recent available, showed that the index was 1.2% lower than its all-time high achieved one year earlier.
A positive reading in the 20-city index would effectively mark the end of what turned out to be a relatively mild correction in home prices. Following a significant climb in mortgage rates towards the end of 2022 and throughout 2023, unadjusted prices measured by the Case-Shiller 20-city index dropped by slightly less than 7% from their peak to the trough.
It is worth noting that while prices declined compared to a year ago for the first time in February, monthly data indicate that the most significant pullback actually occurred in late 2022. The declines seen in 2023 were a result of home prices failing to reach their previous peaks this year.
The Case-Shiller index, although widely followed, has a significant time lag. However, more recent data, although less comprehensive, indicate that home prices have been consistently above year-ago levels for two consecutive months. This increase can be attributed to high mortgage rates dissuading sellers from listing their homes.
According to Freddie Mac, the average 30-year fixed mortgage rate last week stood at 7.19%, nearly one percentage point higher compared to the previous year. These rates are considerably higher than the sub-3% rates that were common earlier in the pandemic period.
Home Prices Show Positive Growth in July
CoreLogic’s Home Price Index Reveals Strong Appreciation
According to CoreLogic, a leading provider of property data and analytics, home prices in the United States have shown steady growth. In July, prices were 2.5% higher nationwide compared to the previous year. Selma Hepp, Chief Economist at CoreLogic, attributes this surge to the strong appreciation observed earlier this year.
Prices Perk Up Despite Slow Home Sales
Despite existing homes being sold at the slowest rate since January, prices have managed to perk up. Data from the National Association of Realtors shows that in August, the median home sold for $407,100, reflecting a 3.9% increase compared to the previous year. This marks the second consecutive month of positive year-over-year price gains since July.
Moderate Growth Reflects Mortgage Rates
While home prices are still on the rise, the recent numbers indicate a moderation in price appreciation. Selma Hepp explains that high mortgage rates have acted as a deterrent for significant price surges. Consequently, monthly increases are aligning with historic seasonal averages. Homeowners can expect continued growth but within expected seasonal patterns.
Regional Disparity in Price Gains
Although the 20-city index predicts an overall increase in prices, the gains are not expected to be uniform across different regions. Case-Shiller data reveals that San Francisco, Seattle, and Las Vegas experienced the lowest price growth compared to the previous year. On the other hand, Chicago, Cleveland, and New York registered the highest price appreciation.
Written by Shaina Mishkin