Home prices back near all-time highs

In June, the housing market demonstrated remarkable resilience despite the challenges posed by low supply and elevated mortgage rates. The S&P CoreLogic Case-Shiller home price index, after seasonal adjustments, registered a noteworthy 0.7% month-over-month increase. This marks the fifth consecutive monthly upswing in prices. Additionally, both the 10-City and 20-City composites saw encouraging growth with increases of 0.9%.

When compared to June of the previous year, the home price index remained relatively stable, showing a marginal change from the preceding month's decrease of -0.5%.

Craig Lazzara, the managing director at S&P DJI, noted, "U.S. home prices maintained their upward trajectory in June 2023." He further elaborated that the National Composite experienced a 0.9% rise in June, standing a mere -0.02% below its peak recorded exactly a year ago. Similarly, the 10-City and 20-City Composites each enjoyed a 0.9% increase in June 2023. However, they were still -0.5% and -1.2% below their respective peaks in June 2022.

Both the seasonally adjusted and unadjusted data revealed escalating prices across all 20 cities in June. Over the past 12 months, positive returns were observed in 10 cities, and half of the cities within the sample achieved their highest price levels to date.

Cities such as Chicago (4.2%), Cleveland (4.1%), and New York (3.4%) led in terms of year-over-year price gains. Conversely, cities in the Pacific and Mountain time zones, including San Francisco (-9.7%) and Seattle (-8.8%), faced the most significant price declines.

Regionally, the Midwest (+2.8%) continued to exhibit robust housing performance, followed by the Northeast (1.6%). Meanwhile, the West (-5.9%) remained the weakest region in terms of price growth.

Does it make more sense to rent?

For potential buyers who find themselves priced out of the competitive sales market, renting is the natural plan-B. Hannah Jones, an economic data analyst at Realtor.com, noted that rental prices were climbing fastest still in areas that are more affordable, and slower in high-priced areas. She also noted that at a national level, rent price growth has slowed recently as there have been more apartments being built and coming to the market. 

Mortgage Rates' Influence

The trajectory of mortgage rates has played a significant role in the housing market. Since the start of June, mortgage rates have risen by over .6%, as highlighted by Lisa Sturtevant, the Chief Economist at Bright MLS. This increase lead to a decline in the number of home sales, which reached their lowest levels since 2010, but declining sales hasn't lead to declining prices. The housing market had been buoyed by limited inventory and high mortgage rates is beginning to impede demand. On a positive note, there has been a slight increase in supply in new construction houses. However, affordability concerns continue to restrain buyer interest.

Looking Forward

Although acknowledging the challenges, Sturtevant indicated that June could be a turning point for prices. She anticipates modest year-over-year declines in several markets during the upcoming fall season, attributing this to the combination of a robust economy and constrained supply.

“June might be a turning point for prices,” said Sturtevant. “Given the robust economy and low supply, don’t expect a major price correction, but it’s likely we’ll see modest year-over-year price declines in many markets this fall.”