Home prices rose 6.5% by the end of 2023 over the year prior, with gains in 96 of the 100 largest metropolitan areas, according to the Federal Housing Finance Agency’s (FHFA) latest House Price Index (HPI), released Tuesday.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions and also released Tuesday, reported a 5.5% annual gain in December 2023, up from 5% in November.
CoreLogic Chief Economist Dr. Selma Hepp commented that pent-up demand for homes continues to drive prices despite high interest rates.
“While S&P CoreLogic Case-Shiller Index continues to show resiliency of home prices against surging borrowing costs, it also highlights continued headwinds for the housing market, namely elevated mortgage rates and severely lacking inventory of existing homes for sale,” Hepp said. “And as mortgage rates continue to flirt in the 7% range, it will be difficult to convince existing homeowners to move right now. Nevertheless, as the recent surge in mortgage application data has shown following a drop in rates, buyers are anxiously waiting to jump in the market as soon as mortgage rates fall. That means that 2024 will show another year of home price highs.”
Prices actually declined month-over-month in 17 out of the 20 major metro markets in December, the S&P CoreLogic Case-Shiller Indices showed.
The U.S. National Index showed a continued decrease of 0.4%, while the 20-City Composite and 10- City Composite posted 0.3% and 0.2% month-over-month decreases respectively in December. After seasonal adjustment, the U.S. National Index, the 20-City Composite, and the 10-City Composite all posted month-over-month increases of 0.2%.
“U.S. home prices faced significant headwinds in the fourth quarter of 2023,” said Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices. “However, on a seasonally adjusted basis, the S&P Case-Shiller Home Price Indices continued its streak of seven consecutive record highs in 2023. Ten of 20 markets beat prior records, with San Diego registering an 8.9% gain and Las Vegas the fastest rising market in December, after accounting for seasonal impacts.”
CoreLogic’s 10-City Composite showed an increase of 7% month-over-month, up from a 6.3% increase in November. The 20-City Composite posted a year-over-year increase of 6.1%, up from a 5.4% increase the month prior. San Diego reported the highest year-over-year gain among all 20 cities at 8.8%, followed closely by Los Angeles and Detroit, which each posted an 8.3% increase. Portland, which had the smallest YOY growth, showed a small 0.3% increase in December, the first following 11 months of price declines.
“U.S. house prices increased modestly over the course of 2023,” Dr. Anju Vajja, acting deputy director for FHFA’s Division of Research and Statistics, said in a statement. “However, the market showed signs of softening as house price appreciation was lower in the fourth quarter of the year than in the previous quarter.”
On a national scale, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.
House prices rose in 49 states between the fourth quarter of 2022 and the fourth quarter of 2023, with the highest annual appreciation in Rhode Island (15.1%); Vermont (13.3%); West Virginia (12.4%); Connecticut (12.2%); and New Jersey, (11.4%). The two areas with annual price depreciation were Hawaii (-3.4%) and District of Columbia (-1.2%).
The metro reporting the highest annual price increase was Miami-Miami Beach-Kendall, FL, at 13.8%. The most significant decline was reported in Urban Honolulu, HI at -12.9%.
Regionally, the Midwest and Northeast both experienced the greatest annual appreciation at 6.7%.
“Looking back at the year, 2023 appears to have exceeded average annual home price gains over the past 35 years,” Luke pointed out. “With trend growth at the national level of 4.7%, a 5.5% return demonstrates solid, steady growth. While we are not experiencing the double-digit gains seen in the previous two years, above trend growth should be well received considering the rising costs of financing home mortgages.”
