While mortgage interest rates were rising, home prices reached an all-time high on the S&P CoreLogic Case-Shiller National Home Price Index.
Nationally, prices rose 5.4% from June 2023, on a three-month average through June, according to data released Tuesday. While the index was a record high, the annual gain was lower than May’s reading of 5.9%.
The 10-city composite index rose 7.4% year-on-year, down from 7.8% in the previous month. The 20-city composite index rose 6.5% year-on-year, down from a 6.9% gain in May.
“While both housing and inflation have slowed, the gap between them is wider than historical norms, with our national index averaging 2.8% more than the CPI,” Brian Locke, head of commodities, real and digital assets at S&P Dow Jones Indices, said in a press release. “That’s a full percentage point above the 50-year average. Before inflation, home prices have risen more than 1,100% since 1974, but after inflation, they’ve more than doubled (111%).”
New York saw the biggest annual increase among the 20 cities, with prices rising 9% in June, followed by San Diego and Las Vegas with annual increases of 8.7% and 8.5%, respectively. Portland, Oregon, saw just a 0.8% annual increase in June, the smallest increase among major cities.
Since housing affordability has been a major talking point this election cycle, this month’s report also breaks down home values by price category, dividing each city’s market into three categories. Looking at just the largest markets over the past five years, it found that 75% of the markets it covered showed lower-priced categories rising faster than the overall market.
“For example, lower-end home prices in the Atlanta market rose 18% faster than middle- and upper-end home prices,” Locke wrote in the statement.
“New York’s lower-end home prices are the biggest outperformer in five years, up about 20% over the overall New York area,” he added. “New York also has the largest divergence between lower-end and upper-end home prices. Conversely, San Diego has seen the largest increase in upper-end home prices over the past five years.”
Prices in the San Diego market as a whole have risen 72% in the past five years, but the high end has risen 79% versus 63% for the low end.
The price increase came even as mortgage rates rose sharply from April to June, the period the index is averaged. Rates typically cool off when rates rise.
According to Mortgage News Daily, the average 30-year fixed rate started April at just under 7% and then rose to 7.5% by the end of the month. Rates remained above 7% before falling back below that level in July. The 30-year fixed rate is now around 6.5%.
“Mortgage rates have fallen since June, but there is evidence that even the decline in rates has not been enough to bring buyers back into the market,” said Lisa Sturtevant, chief economist at BrightMLS. “Some buyers are waiting for home prices to fall — not just interest rates.”
While home prices are expected to decline month-over-month as we head into the fall, due to seasonal factors and more inventory on the market, they are unlikely to fall significantly and are expected to remain higher than they were last fall.
