After steadily declining for seven consecutive months, housing prices have now increased for an even longer streak — eight months in a row, according to a new report. S&P CoreLogic’s latest Case-Shiller U.S. National Home Price NSA Index, released November 28, reports that home-price growth rose in September 2023 by 3.9 percent, more than a full percentage point over August’s 2.6 percent jump. Fifteen of the 20 metro markets measured by Case-Shiller reported month-over-month price increases.
Index reaches new all-time high
“U.S. home prices continued their rally in September 2023,” said Craig J. Lazzara, managing director at S&P DJI, in a statement. “Our national composite rose by 0.3 percent in September, marking eight consecutive monthly gains since prices bottomed in January 2023. The composite now stands 3.9 percent above its year-ago level and 6.6 percent above its January level.” The 10- and 20-city composites each also rose again in September, both higher year-over-year.
Lazzara noted that it is shaping up to be a historically high year for the index. “On a year-to-date basis, the national composite has risen 6.1 percent, which is well above the median full calendar year increase in more than 35 years of data,” he said. “Notably, the national composite, the 10-city composite and 10 individual cities stand at their all-time highs.” The cities hitting all-time highs in September are Atlanta, Boston, Charlotte, Chicago, Cleveland, Detroit, Miami, New York, Tampa and Washington.
Regional fluctuation continues
Detroit topped the list for highest percentage of price growth this month, with the top three representing three distinct regions. “On a year-over-year basis, the three best-performing metropolitan areas in September were Detroit (+6.7 percent), San Diego (+6.5 percent) and New York (+6.3 percent),” Lazzara said.
At the other end of the scale, the biggest decliners were all in the West: “San Diego’s presence breaks the Rust Belt’s recent grip on the top three positions, but the bottom three continue to have a western flavor,” he said. September’s worst performers, year-over-year, were Las Vegas, down 1.9 percent, Phoenix, down 1.2 percent, and Portland, down 0.7 percent.
The West also saw the biggest overall regional decline with 1.3 percent. The Northeast and Midwest remain strong in September, with 5.3 percent and 5.0 percent increases, respectively.
The Fed and the housing market
The Federal Reserve’s aggressive moves to combat inflation — with 10 consecutive rate hikes over 2022 and 2023 — have put upward pressure on mortgage rates. While the Fed doesn’t directly set mortgage rates, the mortgage market’s interpretations of the central bank’s moves influence how much you pay for your home loan.
The long period of low mortgage rates following the Great Recession came to an end in 2022. In June 2022, rates topped 6 percent for the first time since 2008. The upward trend continued in October, when rates topped rates topped 7 percent, then 8 percent. As of November 21, 2023, the average 30-year mortgage rate had backed off the 8 percent threshold, sitting at 7.55 percent.
Steve Reich, division president at Go Mortgage in Pennsylvania, highlights the impacts that these trends have on the housing market. “As the Fed works to get inflation under control, higher interest rates tempered what many homebuyers can afford and, in turn, softened home sales,” he said in a statement.
The higher rates also exacerbate the housing shortage, stopping many homeowners from selling when they otherwise might — and thus keeping those homes off the market and out of the supply of available housing.
The remarkable rise in mortgage rates is acting as a kind of golden handcuffs.
— Mark Hamrick, Bankrate Senior Economic Analyst
“The remarkable rise in mortgage rates is acting as a kind of golden handcuffs,” says Mark Hamrick, Bankrate’s senior economic analyst. Higher rates are “limiting the desire and some of the ability of people to move out of the homes they currently own. That further pressures housing inventory, adding insult to supply injury.”
What it means for homebuyers and sellers
The current market has proved challenging on both sides of the real estate transaction — and unless we see a significant drop in either home prices or mortgage rates, both buyers and sellers will need to go with the flow. “For prospective sellers, the new status quo dictates they remain flexible on price, given the extraordinary challenges posed by the sharp increase in mortgage rates,” Hamrick says.
“Those who are very motivated to purchase a home should be prepared for the sticker shock associated with the increased expense of financing the purchase,” he continues. “Part of the flexibility that may be required includes seeking a possible downgrade of footprint or quality of home, along with the neighborhood, in order to achieve an affordable purchase.”
However, Reich emphasizes that buying a home in today’s market, while difficult, is still possible. “The average time active listings stay on the market is getting longer, resulting in a slightly less competitive market,” he says. National Association of Realtors data proves that out: The median days-on-market length was 23 days in September, up both month-over-month and year-over-year, which gives buyers more time to make an informed, well-considered decision. “And that’s good news for homebuyers who are still in the game.”
