The Numbers
Home prices in the 20 largest U.S. metros have continued to rise for the tenth consecutive month, reaching a record high due to a low number of listed homes. According to the S&P CoreLogic Case-Shiller 20-city house price index, there was a 0.1% increase in November compared to the previous month. Over the past year, home prices in these metro markets have risen by 5.4%. The national index, which provides a broader measure of home prices, also saw a 0.2% increase in November and a 5.1% increase over the past year. All figures have been seasonally adjusted, and both the 20-city and national indexes have reached their all-time high.
Key Details
In November, Detroit experienced the most significant year-over-year home-price gains, with prices rising by 8.2%. This marks the third consecutive month where Detroit has been the best performing real estate market. On the other hand, Portland was the only city that observed home prices falling in November.
According to a separate report from the Federal Housing Finance Agency, home prices increased by 0.3% in November compared to the previous month, and they have seen a 6.6% rise over the past year.
A Persistent Pattern
Despite the rise in mortgage rates between October and November, which has impacted home-buying demand, the persistently limited housing supply has resulted in further price increases. The imbalance between the demand from home buyers and the reluctance of homeowners to sell due to low rates is likely to continue shaping the market dynamics.
Home Prices Expected to Continue Rising
According to Brian D. Luke, head of commodities, real and digital assets at S&P DJI, the growth in U.S. home prices in November 2023 was the largest of the year, with the National Composite rising by 5.1%. Luke also stated that most markets are experiencing an increase in home prices, indicating a shift away from the previous trend of double-digit growth in the South and flat growth in the Midwest.
The decline in mortgage rates since November may further contribute to the upward trend in home prices. Selma Hepp, chief economist at CoreLogic, believes that the combination of lower mortgage rates and the anticipation of increased home buying demand in the upcoming spring season will sustain the rise in prices. She also emphasizes the influence of young buyers, who have been patiently waiting for lower rates, and the significant influx of immigrants in recent years, contributing to the already considerable pent-up demand for homes in the market.
As a result, it is expected that home prices will continue their march upwards into the new year. This positive outlook has already made an impact on the stock market, with stocks such as DJIA SPX recording an increase in early trading on Tuesday. The yield on the 10-year Treasury note BX:TMUBMUSD10Y also exceeded 4%.
With these factors aligning, the real estate market is poised for continued growth, providing potential opportunities for both buyers and sellers.