Home prices hit new high in December but show signs of cooling: Case-Shiller

Home prices across the country hit a new record in December. (iStock)

Home prices hit record highs in December, despite high borrowing costs and housing remaining out of reach for many Americans, according to the latest S&P CoreLogic Case-Shiller Index did report.

House prices are currently 5.5% higher than this time last year. The 10-city total increased by 7% annually, up from a 6.3% increase in the previous month. At the same time, the 20-city composite recorded a 6.1% increase, up from the previous month’s 5.4% rise. The rise in home prices comes even as borrowers struggle with high mortgage rates.

“Looking back at this year, it looks like 2023 will outpace the average annual increase in home prices over the past 35 years,” said Brian Luke, head of commodities at S&P Dow Jones Indices. “The 5.5% return indicates solid and steady growth, as the growth trend at the national level is 4.7%.”

“Although we are not seeing the double-digit growth seen over the past two years, above-trend growth should be welcome given rising mortgage funding costs,” Luke continued.

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Almost 89% of U.S. homeowners with a mortgage have an interest rate of less than 6%: REDFIN

These cities saw the most dramatic increases in home prices.

San Diego, Los Angeles and Detroit lead the fastest growing cities in the US. San Diego reported the highest year-over-year growth in December at 8.8%, followed by Los Angeles and Detroit, each with an 8.3% increase.

The smallest increase in December was in Portland, where home prices rose just 0.3% from a year earlier. However, in the December report, all 20 cities reported year-on-year increases for the first time in 2023.

Although housing prices nationwide have been rising year by year, they have softened slightly compared to the previous month due to high mortgage interest rates and a shortage of housing supply. House prices in December fell 0.4% from the previous month. The composite index for 10 cities fell by 0.2%, and the composite index for 20 cities fell by 0.3%. This index measures housing prices in major cities across the country.

Mortgage interest rates reached nearly 8% in November, but had fallen to the mid-6% range by the end of December. The consensus is that mortgage rates will continue to fall in 2024 as the Federal Reserve begins lowering interest rates. This will likely lead to more consumers returning to the market for limited housing supply, said Thelma Hepp, chief economist at CoreLogic.

“While the S&P CoreLogic Case-Shiller Index continues to demonstrate the resilience of home prices to rising borrowing costs, continued headwinds to the housing market, including rising mortgage rates and “It also highlights the serious shortage of existing housing inventory.” “With mortgage rates continuing to hover in the 7% range, it will be difficult to convince existing homeowners to move now.”

“Nevertheless, buyers are anxiously waiting to jump into the market as soon as mortgage rates drop, as the recent surge in mortgage application data after the rate drop shows.” Hepp said. continued. “This means that housing prices will reach record highs again in 2024.”

Homebuyers can find the best mortgage rates by researching and comparing options. Visit online marketplaces like Credible to compare interest rates, choose loan terms, and get pre-approved from multiple lenders at once.

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The Fed is in no hurry to cut interest rates

Homebuyers will have to wait even longer until mortgage rates drop significantly. minutes The most recent Federal Open Market Committee (FOMC) meeting made it clear that officials, who have expressed optimism and caution on inflation, are in no hurry to cut interest rates. FOMC officials said they would not cut interest rates “until they have more confidence” that inflation is moving toward the 2% target rate.

“Most participants noted the risks of acting too hastily to ease the policy stance, and noted the risks of acting too hastily to ease the policy stance, and that they believe that in determining whether inflation has fallen sustainably to 2%, “We emphasized the importance of carefully evaluating future data.”

The Federal Reserve has kept the federal funds rate at a 22-year high of 5.25% to 5.5%, but plans to cut rates starting this year. Fed officials expect at least three rate cuts this year, with the central bank saying rates are expected to fall to 4.6%. Latest economic forecasts In its Summary of Economic Projections (SEP) it said:

If you want to refinance your mortgage to take advantage of current mortgage rates, or are ready to choose the best rate on your new mortgage, visit online marketplaces like Credible to compare rates and Consider getting pre-approved from multiple lenders.

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