Home price gains climbed to a new high across the nation in July defying affordability challenges that have kept many homebuyers on the sideline, according to the latest S&P CoreLogic Case-Shiller Indices report.
Home prices have increased enough over the last six months to recover the 5% loss between June 2022 and January. Nationwide, home prices rose by 0.6% in July and now stand 1% above its year-ago level. The 10-city and 20-city composite gained 0.8% and 0.9%, respectively – the indices measure home prices in major metros across.
The annual gain in home prices beat forecasts that called for a 0.5% year-over-year increase in the National index for July.
"The increase in prices that began in January has now erased the earlier decline, so that July represents a new all-time high for the National Composite," said Craig Lazzara, S&P Dow Jones Indices managing director. "Moreover, this recovery in home prices is broadly based.
"On a year-to-date basis, the National Composite has risen 5.3%, which is well above the median full calendar year increase in more than 35 years of data," Lazzara continued. "Although the market's gains could be truncated by increases in mortgage rates or by general economic weakness, the breadth and strength of this month's report are consistent with an optimistic view of future results."
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The gain in home prices shows that demand for housing exists even at 7% mortgage rates. The average 30-year fixed-rate mortgage increased to 7.19% last week, according to Freddie Mac. The higher borrowing costs have cooled buyer demand, but the lack of available housing supply has helped keep home prices steady, according to Realtor.com Chief Economist Danielle Hale.
"Today's S&P CoreLogic Case-Shiller Index showed that buyer demand continues to outmatch housing supply, creating upward pressure on home prices despite the fact that home purchase costs are taking up an outsized share of household incomes," Hale said in a statement.
However, the latest figures for existing home sales show the strain of high home prices and mortgage rates. Existing home sales moved lower in August, according to the National Association of Realtors. Total existing home sales slid 0.7% from July to a seasonally adjusted annual rate of 4.04 million in August. Sales fell 15.3% year-over-year, down from 4.77 million in August 2022.
"Home sales have been stable for several months, neither rising nor falling in any meaningful way," NAR Chief Economist Lawrence Yun said. "Mortgage rate changes will have a big impact over the short run, while job gains will have a steady, positive impact over the long run."
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Chicago, Cleveland and New York saw the most significant year-over-year gains among the 20 cities in July. Chicago remained in the top spot with a 4.4% year-over-year price increase. Cleveland came in second, registering a 4% increase, and New York recorded a 3.8% gain.
"Areas in the Midwest continue to lead the national gains given their relative affordability," CoreLogic Chief Economist Selma Hepp said in a statement. "Markets that saw home prices reset following the recent surge in mortgage rates are expected to see stronger gains over the next 12 months, particularly those in the West."
While 12 cities reported higher prices, eight saw prices dip on an annual basis. The worst performer was Las Vegas, which saw a 7.2% drop in home prices. Phoenix saw the second-steepest drop of 6.6% in home prices. Part of the reason why home prices have lagged in these markets is because supply has held up better, according to Hale.
"Households who need to move now and are ready to buy can find some solace in the fact that relatively predictable seasonal trends point to the week of October 1 through 7 as the best time to buy this year," Hale said. "During this week, home shoppers can expect to find more homes for sale and lower buyer demand than the typical week alongside prices that are below the year's peak price."
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