Recent data indicates a slight cooling in the housing market, with November witnessing a minor decrease in home prices despite a continuous annual upsurge, setting a cautious yet hopeful tone for 2024.
According to the S&P CoreLogic Case-Shiller index, there was a modest 0.2% reduction in home prices for November, alongside a notable 5.1% increase on a yearly basis, improving from a 4.7% rise in October. This marks the first monthly decline since January 2023, breaking a nine-month streak of increases and reverting the index to summertime levels.
Brian Luke of Dow Jones Indices observed, “After reaching an all-time peak, U.S. home prices slightly retreated in November.” He highlighted significant monthly drops in cities like Seattle and San Francisco, while noting that six cities, including Miami and Atlanta, hit record highs during the same period.
This adjustment in home prices coincided with a peak in mortgage rates, with the Freddie Mac 30-year fixed-rate mortgage nearing an 8% high, as per Federal Reserve statistics. The subsequent decrease in rates by over 1% may lay the groundwork for continued growth in home values.
The sustained elevation in home prices amidst climbing mortgage rates is largely attributed to the scarce housing inventory. Many homeowners, benefiting from lower interest rates secured in the pandemic’s early days, have been hesitant to sell, leading to a tight market.
However, an increase in listings and sustained high mortgage rates may be starting to exert downward pressure on prices, with recent times seeing more negotiation flexibility between buyers and sellers.
After peaking close to 8% in the fall, mortgage rates for the benchmark 30-year fixed-rate loan have retracted to around 6%. This adjustment fuels speculation among industry observers about a potential resurgence in activity with the onset of the traditional spring buying season.
Selma Hepp of CoreLogic anticipates that, spurred by reduced mortgage rates and the upcoming spring demand, home prices will maintain their upward trajectory. This outlook is supported by a significant backlog of demand from younger buyers, those awaiting more favorable rates, and a recent surge in immigration.
Danielle Hale from Realtor.com pointed out that the index reflects a period of fluctuating mortgage rates, concluding on a decrease. “The data captures a time of sharp rate increases, followed by a decline, alongside the first inventory gains seen in several months, hinting at a potentially more balanced market moving forward,” Hale commented.
