Home price growth rose again in August
The latest Case-Shiller Index found that home prices continued to rise for a seventh straight month despite high mortgage rates.
Key points:
- The national index showed a 2.6% annual increase in home prices and a small gain of 0.4% between July and August.
- Seven of the 20 cities in the composite index showed slight declines month-to-month.
- Monthly gains are expected to slow, but annual growth is likely to continue due the price slump at the end of 2022.
Home price growth showed no signs of slowing at the end of summer, again demonstrating how tough it is to afford a home in the U.S.
Prices were up 2.6% year-over-year and edged up 0.4% between July and August — the seventh consecutive monthly increase since prices bottomed out in January, according to the S&P CoreLogic Case-Shiller index.
The Federal Housing Finance Agency's index, which uses loan purchasing data from Fannie Mae and Freddie Mac, rose 5.6% year-over-year in August and was up 0.6% compared to July.
By the end of August, the 30-year fixed rate mortgage had already crossed the 7% threshold, making it a one-two punch for homebuyers. With more potential buyers getting pushed out of the market, or at least being forced to wait longer to buy, "a generation is missing out on crucial years when they could be accumulating wealth through homeownership," said Lisa Sturtevant, chief economist at Bright MLS.
Mortgage rates will continue to drive both the overall housing market and fluctuations in home prices, said Selma Hepp, chief economist at CoreLogic, and annual growth could even increase, she added.
"Higher mortgage rates and seasonal trends will slow monthly gains — with some possible declines in winter months," Hepp said. "Nevertheless the year-to-date gains indicate that growth will pick up through the end of 2023 compared to last year's slump during this time period."
That combo of high home prices and mortgage rates is making renting a more attractive option for now, although home price appreciation could flip that if it continues to rise, said Mark Fleming, chief economist at First American.
"In today's market, our analysis shows that it's slightly more financially prudent to rent versus own, but the dynamic is trending toward owning once more thanks to the benefit of equity accumulation," said Fleming. He noted that it's also possible the dynamic may tilt further in favor of renting if mortgage rates keep rising to a point where home appreciation slows.
Shiller's 20-city index highlighted regional differences in price growth, with no one region dominating when it comes to either increasing or decreasing growth.
On a month-to-month basis, Atlanta, Charlotte and Detroit continue to remain hot, rising 0.8%, while San Francisco's price index fell 0.5%. Cleveland, Dallas, Denver, Minneapolis, Portland and Washington, D.C., also saw slight declines.