U.S. home prices continued to cool in December, declining for the sixth straight month, according to the latest S&P CoreLogic Case-Shiller National Index.
Property prices fell by 0.3% nationwide compared to the previous month and slid 2.7% from their peak value in June 2023. Home price gains decelerated in most of the country, with the index covering all nine U.S. census divisions reporting a 5.8% annual gain in December, down from 7.6% in the previous month. December marked the slowest annual home price gain since August 2020, and the market correction was felt more severely in higher-priced areas.
Seventeen metro areas recorded year-over-year price declines in December, with most of them located in California and pandemic boomtowns such as Coeur d’Alene, Idaho; Boise, Idaho; and Reno, Nevada. Prices fell 4.2% from December 2021 in San Francisco and 1.8% in Seattle.
Meanwhile, some Southern cities are still featuring double-digit home price increases. Miami, Tampa, and Atlanta lead the way, with reported year-over-year gains of 15.9%, 13.9%, and 10.4%, respectively, followed by Charlotte, North Carolina, with a 10% gain.
Interest Rates Driving Market
The Case-Shiller data lags by several months. However, forward indicators also seem to indicate that 2023 could be a bumpy ride for housing, particularly as we approach the critical spring market, also known as the “selling season”.
The National Association of Realtors reported an 8.1% increase in pending home sales in January, the biggest jump since June 2020, following slightly lower mortgage rates at the beginning of the year. This sharp increase seems to indicate that buyers remain extremely reactive to any changes regarding interest rates. With the latest inflation numbers coming in slightly higher than experts’ predictions, another interest rate increase at the Federal Bank’s next meeting later this month seems likely.
“The prospect of stable, or higher, interest rates means that mortgage financing remains a headwind for home prices, while economic weakness, including the possibility of a recession, may also constrain potential buyers,” said Craig J. Lazzara, managing director at S&P. “Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”
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.
