Home Prices Reach Record Highs Across the Nation and in Seven Cities

Despite soaring interest rates and a slowdown in mortgage activity and existing home sales reminiscent of levels seen decades ago, home prices persist in their upward trajectory. Both the S&P CoreLogic Case-Shiller indices and the Federal Housing Finance Agency (FHFA) Housing Price Index (HPI) demonstrate this resilience, marking consecutive months of growth.

The Case-Shiller U.S. National Home Price NSA Index, encompassing all nine U.S. census divisions, recorded a 2.6 percent annual increase in August. This marks a notable uptick from the 1.0 percent growth observed in the previous month. Similarly, the 10-City Composite exhibited a rise of 3.0 percent, compared to 1.0 percent in July, while the 20-City Composite saw its annual gain elevate from 2.0 percent to 2.2 percent.

According to Dr. Selma Hepp, Chief Economist at CoreLogic, the recent moderation in housing prices might offer only a brief pause. “Despite significant increases earlier this year, amounting to a 5 percent climb from the year’s outset, the trajectory of monthly gains is expected to decelerate due to elevated mortgage rates and typical seasonal patterns. We anticipate potential declines during the winter months,” she commented. However, Hepp emphasized that the year-to-date gains suggest a resurgence in growth through the remainder of 2023, a departure from last year’s downturn during the same period.

Chicago maintained its position as the city with the highest appreciation among the 20 cities for the fourth consecutive month. However, in the year ending August 2023, seven of these cities experienced lower prices compared to the preceding year ending July 2023, while 12 cities reported higher prices. Encouragingly, nineteen out of the 20 cities exhibited a positive trend in year-over-year price acceleration compared to the previous month.

Before accounting for seasonal adjustments, the U.S. National Index, 10-City, and 20-City Composites each showed a 0.4 percent month-over-month increase in August. Following seasonal adjustments, the National Index surged by 0.9 percent, while both the 10-City and 20-City Composites saw a 1.0 percent gain.

“U.S. home prices maintained their upward trajectory throughout August 2023,” stated Craig J. Lazzara, Managing Director at S&P DJI, in his analysis. “One notable aspect indicating the robustness of the housing market is the comparison of current prices to historical levels.

It’s remarkable to see that the National Composite, the 10-City Composite, and seven individual cities (Atlanta, Boston, Charlotte, Chicago, Detroit, Miami, and New York) have reached their all-time highs. Additionally, examining the breadth of price changes offers further insight into the market’s health.

When considering seasonally adjusted figures, prices experienced an uptick in 19 out of 20 cities in August, with Cleveland narrowly missing the mark. Even before seasonal adjustments, prices saw an increase in 13 cities.”

“Regional disparities remain pronounced. Looking at year-over-year performance, the top three metropolitan areas in August were Chicago (+5.00 percent), New York (+4.98 percent), and Detroit (+4.8 percent). Chicago has held the top spot for four consecutive months, while New York climbed to the second position this month.

Conversely, the weakest performances continue to originate from the West, with Las Vegas (-4.9 percent) and Phoenix (-3.9 percent) at the bottom of the rankings. The Midwest (+3.9 percent) retains its status as the nation’s strongest region, followed closely by the Northeast (+3.8 percent). Meanwhile, the West (-0.9 percent) and Southwest (-0.8 percent) continue to lag behind.

“On a year-to-date basis, the National Composite has seen a robust increase of 5.8 percent, surpassing the median full calendar year increase observed over more than 35 years of data. Despite the rise in mortgage rates this year, which has dampened housing demand, the supply side has been even more affected. Unless unforeseen factors such as higher rates or broader economic downturns emerge, the broad-based strength evident in this month’s report suggests an optimistic outlook for future performance.”

FHFA reported a 0.6 percent increase in its HMI for August, slightly lower than the 0.8 percent seen in July. However, the annual increase remained strong at 5.6 percent.

In the latest data released, the nine census divisions displayed varying patterns in seasonally adjusted monthly price changes from July 2023 to August 2023. These changes ranged from a slight decrease of 0.2 percent in the South Atlantic division to notable increases of 1.1 percent in both the Pacific and East North Central divisions.

Examining the 12-month changes provides further insight into regional trends. These changes ranged from a modest 2.4 percent increase in the Mountain division to a robust 8.6 percent surge in the Middle Atlantic division. Such disparities highlight the diverse dynamics at play across different regions of the country in the housing market.

“Despite ongoing challenges, both nationally and regionally, house price gains in the U.S. have remained robust over the past 12 months,” stated Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “While the South Atlantic division experienced moderate weakness in August, the remaining census divisions continued to witness positive price appreciation compared to the previous month.”

The Case-Shiller Indices meticulously track matched price pairs for thousands of individual houses, with each index serving as a benchmark in January 2000 at 100. Presently, the National Index stands at 311.50, while the 10- and 20-City Composites are recorded at 331.96 and 317.88, respectively.

FHFA’s Housing Price Index (HPI), on the other hand, relies on home sales financed by either Fannie Mae or Freddie Mac. Established with a benchmark of 100 in January 1991, the current HPI value stands at 411.8, providing crucial insights into the evolving landscape of the housing market.