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Housing market defies gravity
The price of an American home seems to be going nowhere but up as sales prices continued to increase through the first month of the new year.
According to Realtor.com’s Snejana Farberov, the latest S&P CoreLogic Case-Shiller Index data released Tuesday showed that the nationwide price went up 4.1% in January from a year ago. “Home prices in the 20 major U.S. metros tracked by the index were up 4.7% in the 12 months ending in January, up from a 4.5% increase in the previous month. The 10-city index also increased, going up 5.3%,” says Farberov.
The numbers indicate New York City with the highest annual gain among the 20 cities with a 7.7% surge in January, followed by Chicago and Boston, with upswings of 7.5% and 6.6%, respectively.
On the other end of the spectrum, Tampa, FL, showed the lowest return, dipping 1.5%, making it the only market to post an annual decline.
"As the country as a whole faces tight inventory levels, regional variation in the housing market means that the impact varies geographically," says Realtor analyst Hannah Jones. "Relatively strong construction activity in the South and West have helped take some pressure off of home prices. However, the Northeast and Midwest continue to see demand significantly outstrip supply, which has led to more considerable price growth in the regions."
Farberov reports that this month's Case-Shiller release covers home sales that happened over November, December, and January that included skyrocketing mortgage rates that peaked at a nine-month high.
A closer look reveals home price trends during the second half of the year posting declines as well, with San Francisco recording the largest six-month drop at 3.4%, followed by Tampa at 3.2%.
“Only four of the 20 metros managed to eke out price gains during this stretch: New York, Chicago, Phoenix, and Boston, pointing to a widespread cooling of the market,” says Farberov.
S & P’s Nicholas Godec explains, ”Rising mortgage rates throughout the year elevated monthly payment burdens, which, combined with already high home prices, pushed affordability to multi-decade lows in many regions.” He says a lack of affordable homes likely contributed to the market softening in the back half of the year, with both buyers and sellers staying on the sidelines.
Interestingly enough, markets in the Northeast and the Midwest are continuing to reap benefits from post-COVID-19 pandemic urban recovery, while Sunbelt metros like Tampa and Phoenix that saw dramatic surges in home prices earlier in the cycle have since been on the receiving end of the sharpest downturns.
Jones says economic uncertainty could interfere with the spring market by making buyers and sellers more cautious. "Nevertheless, the recent downward mortgage rate trend and building inventory could present opportunities for buyers who have been waiting for their moment to take the leap," says the analyst.
Realtor, TBWS
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