Home prices have skyrocketed in many housing markets across the country for the past three years under the combined influence of the pandemic-fueled increased demand, low mortgage rates, and shrinking inventory. However, since the Federal Reserve Bank significantly increased interest rates (as a means to fight against the decades-high inflation) housing demand has noticeably declined. As a result, some areas have started to show a decline in home prices in year-over-year comparisons, although many housing markets still remain tight.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, declined for the seventh straight month in January, its longest streak of declines since 2012 and the smallest increase since December 2019. The index covers all nine U.S. census divisions and reported a 3.8% annual gain in January, a drop from a 5.6% annual growth in December.
Meanwhile, a separate measure of home-price growth released by the Federal Housing Finance Agency found a 5.3% increase in home prices in January from a year earlier. The FHFA index rose 0.2% in January from the prior month on a seasonally adjusted basis.
East Goes Up, West Goes Down
Not all housing markets are faring the same, and the indexes highlight very distinct scenarios in different parts of the country, although all analyzed cities reported lower prices in the year ending January compared with the year ending December 2022.
According to the Case-Shiller Index, West Coast cities are the most affected by the housing market decline. San Francisco, San Diego, Seattle, and Portland, Oregon, all experienced price declines in January. Meanwhile, Eastern cities still show noticeable increases, particularly in the south. Miami, Tampa, and Atlanta once again reported the highest year-over-year gains in prices among the 20 cities analyzed in January.
“One of the most interesting aspects of January’s report is the continued weakness in home prices on the West Coast, as San Diego and Portland joined San Francisco and Seattle in negative year-over-year territory,” said Craig Lazzara, managing director at S&P Dow Jones Indices. “It’s therefore unsurprising that the Southeast (+10.2%) continues as the country’s strongest region, while the West (-1.5%) continues as the weakest.”
Seven of the 10 least-affordable markets in January were in the West, including San Francisco, Seattle, and Los Angeles, according to Black Knight. Many of these cities rely on tech industries, which have been affected by recent lay-offs and widespread remote work since the pandemic. On the other end, prices in some Southern cities remain relatively affordable and feature dynamic job markets, continuing to attract newcomers.
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
