The latest data from the S&P CoreLogic Case-Shiller U.S. National Home Price Index reveals that despite mortgage interest rates increasing, home prices have reached the highest level ever. In June, prices nationally were 5.4% higher compared to June 2023. Although this marks a record high for the index, the annual gain was slightly lower than the previous month at 5.9%.
New York led the 20 cities with the highest annual gain, seeing a 9% increase in June. Following closely behind were San Diego and Las Vegas, showing annual increases of 8.7% and 8.5%, respectively. However, Portland, Oregon, only experienced a 0.8% annual rise in June, making it the city with the smallest gain among the top cities.
In light of the ongoing discussions surrounding housing affordability, the latest report also examined home values based on price tier across different cities. Analyzing large markets over the past five years, it was observed that 75% of the markets covered exhibited low-price tiers rising faster than the overall market. For instance, the lower tier of the Atlanta market has outpaced middle- and higher-tiered homes by 18%. Similarly, New York’s low tier has seen a significant five-year outperformance, rising nearly 20% above the overall region.
The surge in home prices occurred against a backdrop of rising mortgage rates from April to June, a period encompassed by the index. Despite the common belief that prices cool when rates rise, the average rate on the 30-year fixed mortgage surpassed 7% in April and reached 7.5% by the end of the month. Although rates have since fallen back to around 6.5%, there is evidence suggesting that declining rates may not be sufficient to entice buyers back into the housing market.
As we head into the fall, it is expected that home prices will ease month-to-month due to seasonal factors and increased inventory in the market. However, significant drops in prices are unlikely, and they are anticipated to remain higher compared to last fall. This underscores the continued challenges in the housing market, with affordability remaining a key concern for prospective buyers.
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