Amid an environment of tight inventory and stubbornly high mortgage rates, housing prices in the U.S. continue to rise ever higher. S&P CoreLogic’s latest Case-Shiller U.S. National Home Price NSA Index, released June 25, 2024, reports that annual home-price growth increased in April 2024 by 6.3 percent. That’s a new all-time high, breaking the previous record set last month.
Case-Shiller Index still rising
In addition to the 6.3 percent overall increase, April numbers increased annually for both of Case-Shiller’s composite indices as well, with the 10-city index up 8.0 percent and the 20-city index up 7.2 percent.
“For the second consecutive month, we’ve seen our national index jump at least 1 percent over its previous all-time high,” said Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices, in a statement. “2024 is closely tracking the strong start observed last year, where March and April posted the largest rise seen prior to a slowdown in the summer and fall. Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year.”
Regional fluctuation continues
The Northeast continues to outpace other regions in price growth: “The Northeast is the best performing market for the previous nine months,” Luke said. “It’s now been over a year since we’ve seen the top region come from the South or the West.”
Thirteen markets are at individual all-time highs as well, though some cities saw much higher jumps than others. San Diego once again led the pack, as the only city to achieve double-digit growth. “San Diego reigns supreme once again, topping annual returns for the last six months,” Luke said.
The top five increases were:
- San Diego (10.3 percent)
- New York (9.4 percent)
- Chicago (8.7 percent)
- Los Angeles (8.6 percent)
- Cleveland (8.5 percent)
Cities that saw the slowest rates of growth were again Denver and Portland, at 2.0 percent and 1.7 percent, respectively.
The Fed and the housing market
The Federal Reserve’s aggressive moves to combat inflation — with 10 consecutive rate hikes over 2022 and 2023 — have put upward pressure on mortgage rates, even as inflation declined. While the Fed doesn’t directly set mortgage rates, the mortgage market’s interpretations of the central bank’s moves influence how much you pay for your home loan.
The long period of low mortgage rates following the Great Recession came to an end in 2022. In June 2022, rates topped 6 percent for the first time since 2008. The upward trend continued through October, when rates hit a 23-year high of 8 percent. Steve Reich, VP of operations at CrossCountry Mortgage in Pennsylvania, highlights the impacts that these trends have on the housing market. “As the Fed worked to get inflation under control, higher interest rates tempered what many homebuyers could afford and, in turn, softened home sales,” he said in a statement.
Higher rates also exacerbate the housing shortage, stopping many homeowners from selling when they otherwise might — and thus keeping those homes off the market and out of the supply of available housing.
The remarkable rise in mortgage rates is acting as a kind of golden handcuffs.
— Mark Hamrick, Bankrate Senior Economic Analyst
“The remarkable rise in mortgage rates is acting as a kind of golden handcuffs,” says Mark Hamrick, Bankrate’s senior economic analyst. Higher rates are “limiting the desire and some of the ability of people to move out of the homes they currently own. That further pressures housing inventory, adding insult to supply injury.”
While rates are thankfully no longer hovering around 8 percent, they remain elevated: As of June 19, 2024, the average 30-year mortgage rate sat at 7.03 percent.
What the Case-Shiller Index means for homebuyers and sellers
The current market has proved challenging on both sides of the real estate transaction — and unless we see a significant drop in either home prices or mortgage rates, both buyers and sellers will need to go with the flow. “For prospective sellers, the new status quo dictates they remain flexible on price, given the extraordinary challenges posed by the sharp increase in mortgage rates,” Hamrick says.
“Those who are very motivated to purchase a home should be prepared for the sticker shock associated with the increased expense of financing the purchase,” he continues. “Part of the flexibility that may be required includes seeking a possible downgrade of footprint or quality of home, along with the neighborhood, in order to achieve an affordable purchase.
Reich emphasizes that buying a home in today’s market, while difficult, is still possible. “The average time active listings stay on the market is getting longer, resulting in a slightly less competitive market,” he says. National Association of Realtors data proves that out: The median days-on-market length was 24 days in May, up from just 18 days in May of last year, which gives buyers more time to make an informed, well-considered decision. “And that’s good news for homebuyers who are still in the game.”
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