While high mortgage rates at the end of 2023 continued to dampen monthly appreciation in December, annual home prices reported a 5.5% gain, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
“Despite affordability headwinds, prices continued to climb in December 2023. Primarily due to demand outpacing the extremely limited supply, the 20-city index rose to all-time highs. While some inventory relief is expected in 2024, the upward pressure on prices is projected to remain,” says Nik Scoolis, manager, housing economics, at Zonda.
Year over year, the 10-City Composite showed an increase of 7%, up from a 6.3% increase in November. The 20-City Composite posted an increase of 6.1%, up from a 5.4% increase in 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, holding the lowest rank after reporting the smallest year-over-year growth.
“U.S. home prices faced significant headwinds in the fourth quarter of 2023,” says Brian D. Luke, head of commodities, real and digital assets, at S&P Dow Jones Indices. “However, on a seasonally adjusted basis, the S&P Case-Shiller Home Price 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.”
On a monthly basis, 17 out of the 20 major metro markets reported price decreases, with the index showing a continued decrease of 0.4%. 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 index and both composites posted month-over-month increases of 0.2%.
CoreLogic chief economist Dr. Selma Hepp says, “While CoreLogic S&P Case-Shiller Index rose by 5.5% year over year, the stress of high mortgage rates at the end of 2023 continued to depress prices, which were down 0.4% compared to November—the second month of lower prices. Nevertheless, Miami and Las Vegas—joined by Los Angeles—continued to see strengthening of home prices despite higher rates. Miami overall ranked as the strongest appreciating market in 2023, up 6% for the year, compared to national appreciation of 2%. In 2022, Tampa and Miami were the strongest appreciating markets at almost 30% increases in home prices. In contrast, markets in the West—San Francisco, Seattle, Las Vegas, Phoenix, and Portland—are still catching up with 2022 price peaks. But with strong recent price rebounds in Las Vegas and Phoenix in 2023, these two markets are likely to see annual appreciation in 2024.”
Luke adds, “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 homeownership temporarily. The past two years reflect consistent growth slightly above trend, suggesting a more secular shift in homeownership post-pandemic," Luke continues. "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.”
