US Home Prices Continue Rising Despite Economic Headwinds
Home prices in America’s 20 largest cities rose for the 12th consecutive month in January. Prices rose 0.14% month over month and 6.59% year-over-year. Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices, noted, “Our National Composite rose by 6% in January, the fastest annual rate since 2022,” highlighting a nationwide surge. Remarkably, all cities observed in the study reported annual price increases, with San Diego leading at 11.2%.
This rise comes despite mortgage rates hovering above the 7% mark, posing questions about the sustainability of such price advances. Yet, the market has shown resilience, as CoreLogic’s chief economist, Dr. Selma Hepp, points out that the U.S. annual home price growth has strengthened to 5.8% in January 2024. She anticipates, however, that this pace is set to slow, projecting a dip to 2.6% by early 2025.
Despite the cooling forecasts, current market conditions reflect a robust demand outpacing the available supply, thereby maintaining upward pressure on home prices. This scenario has made affordability a pressing issue, especially in markets where wages lag behind the national average. Yet, the real estate sector has seen varied activity, with millennials making up over half of the home purchase applications between 2020 and 2023, showcasing a determined push toward homeownership among younger Americans.
On the flip side, baby boomers, with more substantial financial reserves, are capitalizing on the market dynamics to make outright purchases, intensifying competition for first-time buyers. The situation is further exacerbated by a notable shortage of inventory, which has kept prices buoyant despite higher borrowing costs.
While the housing market confronts challenges such as elevated mortgage rates and inventory shortages, its continued strength is undeniable. However, affordability remains a critical issue, demanding attention from policymakers to ensure broader accessibility to homeownership. The coming months will be crucial in determining whether the market can sustain its growth or will align with the anticipated slowdown.
