U.S. housing prices are continuously reaching new highs, although the rate of increase has slightly decreased. The latest Case-Shiller U.S. National Home Price NSA Index by S&P CoreLogic, published on December 31, 2024, indicates a 3.6 percent growth in home prices for October 2024, a slight drop from the previous month’s 3.9 percent increase.
The Case-Shiller Index reveals a slowdown in price growth, with the 10-city and 20-city indices showing lower annual increases compared to the previous month. Despite the overall 3.6 percent rise, the 10-city index increased by 4.8 percent (down from 5.2 percent in September), and the 20-city index saw a 4.2 percent growth (down from 4.6 percent). Seasonally adjusted, all three indices displayed a 0.3 percent month-over-month increase.
The national index achieved its 17th consecutive record high, with only Tampa and Cleveland experiencing a decline in the past month. Regional variation remains, with cities across the East, West, and Midwest ranking in the top five for price growth in October. New York City led in annual growth at 7.27 percent, followed by Chicago, Las Vegas, Cleveland, and Washington, D.C.
Markets in Florida and Arizona are seeing growth rates below inflation levels, diverging from the substantial gains exceeding 10 percent seen since 2020. Tampa reported the slowest year-over-year growth rate at 0.39 percent.
Looking back over 20 years, Seattle recorded the highest appreciation at 198 percent, followed by Dallas and Charlotte. On the other hand, Cleveland, Detroit, Minneapolis, Las Vegas, and Chicago had lower appreciation rates due to challenges in their respective sectors.
The Federal Reserve’s recent interest rate cuts have impacted mortgage rates, following a period of rate hikes aimed at combating inflation. The lowering of mortgage rates post-Great Recession ended in 2022, with rates peaking at 8 percent in October 2023. These higher rates contribute to the housing shortage, as homeowners find it challenging to sell their properties.
The surge in mortgage rates is playing a significant role in the current housing market dynamics, with homeowners opting to stay put rather than selling their properties. Mark Hamrick, senior economic analyst at Bankrate, describes this phenomenon as a form of “golden handcuffs,” as higher rates are deterring individuals from moving out of their existing homes. This reluctance to sell is contributing to the ongoing shortage of available housing inventory, exacerbating the supply crisis in the market.
While there is a possibility that this trend may shift as the market adjusts and mortgage rates experience a slight decline, the current rates remain notably high. According to Bankrate’s weekly lender survey dated December 31, 2024, the average 30-year mortgage rate stands at 7.04 percent.
The implications of the Case-Shiller Index on both buyers and sellers in the real estate market are profound. The challenging conditions prevailing in the market necessitate a level of adaptability from both parties. Mark Hamrick emphasizes the importance of flexibility for sellers, indicating that they may need to adjust their pricing strategies to align with the market realities.
Prospective homebuyers are advised to brace themselves for potential financial challenges due to the increased cost of financing home purchases. Hamrick suggests that buyers should be prepared for possible compromises, such as exploring homes of smaller sizes or lower quality in different neighborhoods to make their purchases more affordable.
Robert Frick, corporate economist at Navy Federal Credit Union, offers a glimmer of optimism amidst the current market conditions. He notes that even a minor decline in the Case-Shiller Index could signal a sustained deceleration in price growth, which could benefit buyers in the long run. Frick highlights the potential for improved housing affordability if mortgage rates were to decrease in the coming year, creating a more favorable environment for buyers in 2025.
