Case Shiller: 5.5% Annual Home Price Gain in December, Following Similar November Increase

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.5% annual gain in December, up from a 5% rise in the previous month. The data released Feb. 27 for December 2023 also shows that 17 out of the 20 major metro markets reported month-over-month price decreases. 

The 10-City Composite showed an increase of 7.0%, up from 6.3% in the previous month. The 20-City Composite posted a year-over-year increase of 6.1%, up from a 5.4% the previous month. San Diego reported the highest year-over-year gain among the 20 cities, with an 8.8% increase in December, followed by Los Angeles and Detroit, each with an 8.3% increase. Portland showed a 0.3% increase this month, holding the lowest rank after reporting the smallest year-over-year growth.

The U.S. National Index showed a continued decrease of 0.4%, while the 20-City Composite and 10-City Composite posted 0.3% and 0.2% month-over-month decreases respectively in December. After seasonal adjustment, the U.S. National Index, the 20-City Composite, and the 10-City Composite all posted month-over-month increases of 0.2%.

“U.S. home prices faced significant headwinds in the fourth quarter of 2023,” says Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices. “However, on a seasonally adjusted basis, the Indices continued its streak of seven consecutive record highs in 2023. Ten of 20 markets beat prior records, with San Diego registering an 8.9% gain and Las Vegas the fastest rising market in December, after accounting for seasonal impacts.

“2023 U.S. housing gains haven’t followed such a synchronous pattern since the COVID housing boom. The term ‘a rising tide lifts all boats’ seems appropriate given broad-based performance in the U.S. housing sector. All 20 markets reported yearly gains for the first time this year, with four markets rising over 8%. Portland eked out a positive annual gain after 11 months of declines. Regionally, the Midwest and Northeast both experienced the greatest annual appreciation with 6.7%.

“Looking back at the year, 2023 appears to have exceeded average annual home price gains over the past 35 years. With trend growth at the national level of 4.7%, a 5.5% return demonstrates solid, steady growth. While we are not experiencing the double-digit gains seen in the previous two years, above-trend growth should be well received considering the rising costs of financing home mortgages. We previously suggested that the surge in home prices during the COVID pandemic could have accelerated home ownership temporarily. The past two years reflect consistent growth slightly above trend, suggesting a more secular shift in home ownership post pandemic. In the short term, meanwhile, we should be able to measure the impact of higher mortgage rates on home prices. Increased financing costs appeared to precipitate home price declines in the fourth quarter, as 15 markets saw lower values compared to September.”

Bright MLS Chief Economist Dr. Lisa Sturtevant had the following comments on the new data:

“The most recent Case-Shiller index reflects market performance at the end of last year, but there is evidence that market conditions are changing. For example, price indices were down by 0.8% in San Diego and by 0.9% in San Francisco between November and December, but were still rising year-over-year in both metros. According to Bright MLS analysis of Altos Research data, these California metros are seeing some of the fastest growth in new listings, which could put downward pressure on prices.

“Although there is evidence that  more sellers are dropping their list price, the markets with the share of price drops are highly concentrated in Florida, according to our analysis. Of the 10 U.S. metros with the highest share of listings with a price drop, eight are located in Florida. (Fresno, Calif., and Phoenix, Ariz., are the other two.) The December 2023 Case-Shiller index for Miami indicates very strong price growth at the end of the year, but that could shift this spring. Similarly, prices are down modestly month-to-month in Tampa, according to the December 2023 Case-Shiller index, but nearly half of all listings currently on the market have had a price drop, according to Bright MLS’s analysis of Altos Research data. 

“Overall, the U.S. median home price will likely rise in 2024, but there will be a lot of variation, which will be strongly correlated with supply—both new construction and the inventory of existing homes for sale.” Senior Economic Research Analyst Hannah Jones had this commentary shortly before the news release:

“The latest Index showed stable price growth through the end of 2023. This month’s index data tracks October, November and December, a period through which mortgage rates fell sharply from 7.8% in late October to 6.6% by the end of December. While the number of homes for sale dwindled seasonally, data shows that there were more homes on the market and more newly listed homes compared to the prior year in December, the second month in a row to see an increase in active and new listings annually. Pending and new home sales, both of which are based on contract signings, surged in December as mortgage rates eased and buyer demand picked up. Though mortgage rates remained above 6.5% through the end of the year, eager buyers jumped into the market to take advantage of rates almost 1.5 percentage points lower than October’s multi-decade high. Surging demand amid constrained inventory kept upward pressure on prices.

“Looking into 2024, mortgage rates remained fairly steady through January but climbed in recent weeks, inching back towards 7%. After a strong surge in contract signings in December, January saw more subdued new home sales growth. According to a recent survey, roughly 40% of buyers would be willing to participate in today’s market if mortgage rates were to fall below 6%. However, about 1 in 3 would-be buyers are waiting for rates to drop below 5% to jump in, a target that we do not expect to hit this year. Buyer demand will track closely with gains in affordability, but is likely to remain relatively stifled as mortgage rates remain in the mid-to-high 6% range, and perhaps cross back over into 7%-plus territory.”

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