Economists estimate that home prices have risen above year-ago levels in July, marking the first increase in five months. Recent data suggests that this upward trend has continued into the following month.
Case-Shiller Index Shows Positive Growth
The highly anticipated S&P CoreLogic Case-Shiller home price indices are set to be released on Tuesday morning. It is expected that home prices in 20 major metropolitan areas of the country have increased by 0.3% in July compared to the previous year, representing the first gain since February. In June, the index was 1.2% lower than the all-time high recorded one year prior.
Stabilizing the Market
A positive reading in the 20-city index would provide reassurance that the recent home price pullback has been relatively shallow. The unadjusted prices measured by the Case-Shiller 20-city index experienced a decline of just under 7% from peak to trough, following a significant climb in mortgage rates in late 2022 and throughout 2023.
Understanding the Declines
Although February saw a drop in prices compared to the previous year, further analysis reveals that the most significant pullback occurred in late 2022, with declines continuing into 2023 as home prices failed to reach their prior peaks.
Time Lags and More Recent Trends
While the Case-Shiller index is a widely followed indicator of home prices, it does come with a notable time lag. However, more recent, albeit less comprehensive, data indicates that home prices have been rising above year-ago levels for two consecutive months. The high mortgage rates are preventing sellers from listing their homes.
Mortgage Rates Impacting the Market
The average 30-year fixed mortgage rate recorded last week was 7.19%, according to Freddie Mac. This is nearly one point higher than the previous year and significantly higher than the less-than-3% rates that were common earlier in the pandemic.
Home Prices Show Resilience as Growth Regains Momentum
CoreLogic, a provider of comprehensive real estate data, has reported that home prices in the United States are 2.5% higher than they were a year ago. This upswing in prices, observed in data from July, reflects the strong appreciation experienced earlier this year, according to Selma Hepp, CoreLogic’s chief economist.
Despite a notable slowdown in home sales in August, with the rate being the lowest since January, the median home price saw a positive trend. At $407,100, the median home price rose by 3.9% compared to the previous year. This marks the second consecutive month of year-over-year price gains, which began in July.
However, it is important to note that the current growth in home prices is not as drastic as the surge witnessed earlier in the pandemic. High mortgage rates have contributed to a slowdown in price surges, bringing monthly increases back to regular seasonal averages, according to CoreLogic’s Hepp. In other words, while home prices continue to grow, they are aligning with historic seasonal expectations.
It is worth mentioning that the pace of price growth may differ across different regions. Case-Shiller data reveals that in June, San Francisco, Seattle, and Las Vegas saw the lowest prices compared to the previous year, while Chicago, Cleveland, and New York registered the highest prices.
In conclusion, the real estate market is showing resilience as home prices maintain an upward trajectory. Although there has been a slowdown in sales and price appreciation compared to earlier in the year, the market continues to show stability and aligns with historical trends.
