After three consecutive months of annual price declines, home prices in July were up 0.98%, according to the S&P CoreLogic Case-Shiller Home Price Index. Month-over-month, the U.S. National Index posted an increase of 0.6%, while the 10-City posted a 0.8% increase and 20-City Composite a 0.9% increase.
“This month’s index data tracks May, June, and July, a period when mortgage rates neared 7% in mid-July,” Realtor.com Chief Economist Danielle Hale noted.
Existing home sales have borne the brunt of the elevated rates and continued to slip in July. At the same time, new home sales picked up significantly in July as building activity continued to be buoyed by a strong and steady demand.
“U.S. home prices continued to rally in July 2023,” Craig Lazzara, managing director at S&P DJI, said. “Our National Composite rose by 0.6% in July, and now stands 1.0% above its year-ago level. Our 10- and 20-City Composites each also rose in July 2023, and likewise stand slightly above their July 2022 levels.”
“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,” Lazzara added.
In July, prices rose in all 20 cities after seasonal adjustment, and in 19 of them before adjustment.
Chicago (+4.4%), Cleveland (+4.0%) and New York (+3.8%) posted the largest price gains on a year-over-year basis, repeating the ranking we saw in May and June.
At the other end of the scale, the worst performers were Las Vegas (-7.2%) and Phoenix (-6.6%).
The Midwest (+3.2%) continued as the nation’s strongest region, followed by the Northeast (+2.3%). The West (-3.8%) and Southwest (-3.6%) remained the weakest regions.
“The Case Shiller index indicates that the typical home price in July 2023 is about 45% higher than it was four years ago in July 2019,” said Bright MLS Chief Economist Lisa Sturtevant. “This is about the same rate of price growth that occurred during the 2002 through 2006 period when subprime lending drove exuberant housing demand.
“But that is where the similarities end. Today’s housing market is very different from the one that led up to the 2008 financial crisis and ultimately a 20 to 40% home price correction. Inventory is still very low by historic standards and buyers who are able to handle higher mortgage rates are still finding the market very competitive. Mortgage holders are well-qualified and subprime loans are rare. Housing equity is at an all-time high, providing homeowners a very deep cushion against a downturn. Demand is strong, driven by the large millennial population that is in prime first-time homebuying age.”
The rental market has offered a more extended break in pricing
Indeed, rents dipped for a fourth month compared to a year ago, Hale said. However, the cumulative drop in rents remains relatively modest nationwide, only down 2% from the peak. Furthermore, regional trends vary, with some markets still seeing relatively robust rental growth. Meanwhile, a record-high number of multi-family units are on the way, which will provide some relief over the next several months, even as multi-family starts slow, Hale concluded.