Amidst shrinking inventory and rising mortgage rates, home price growth moderated slightly.
In December, the S&P CoreLogic Case-Shiller national index noted a 0.2% increase in home prices, culminating in a 5.5% rise for the entirety of 2023.
Leading the year-over-year growth, San Diego saw an impressive jump of 8.8%, while Los Angeles and Detroit each enjoyed gains of 8.3%.
Brian Luke of S&P Dow Jones Indices remarked, “The U.S. housing market’s performance in 2023 diverged from the synchronized surge seen during the pandemic’s height. This consistent yet modest growth indicates a possible long-term shift in housing dynamics post-COVID.”
Reflecting on the year, Luke observed that 2023’s price increases surpassed the average annual gains witnessed over the last 35 years. He noted, “In the near future, the effects of rising mortgage rates on housing prices will become clearer. The final quarter showed signs of pricing pressure in 15 markets, aligning with heightened financing costs.”
The challenge facing the housing market lies in balancing high prices and mortgage rates, which have left potential buyers cautious. Homeowners benefiting from previously low rates have been hesitant to list their properties, further tightening available inventory.
Mortgage rates are anticipated to decrease as the year progresses, following expected rate cuts by the Federal Reserve, yet they will likely remain above pre-pandemic levels.
Recent data from the Census Bureau highlighted a 1.5% increase in new home sales in January, although December’s figures were adjusted downward. The current sales pace stands at 661,000, with increases noted in all regions except the South, which still reported the highest sales volume for the month.
This Thursday’s pending home sales report for January is projected to show a modest rise, building on December’s 8.3% increase. With the spring buying season underway and mortgage rates around 7% for a 30-year loan, the market’s momentum remains uncertain. However, an uptick in listings could offer more options to buyers.
Hannah Jones from Realtor.com stated, “Despite a seasonal decrease, December saw an increase in both active and new listings compared to the previous year, marking the second consecutive month of annual growth in these areas. The end of the year experienced a surge in both pending and new home sales, driven by a slight relaxation in mortgage rates and a revival in buyer interest. Despite rates remaining over 6.5%, the drop from October’s peak encouraged a flurry of activity, underscoring the ongoing tension between high demand and limited supply, which continues to drive prices upwards.”
