Real Estate
Rising Home Prices: Striking Regional Variations
Jul
Rising home prices in May continued for the fourth consecutive month on the S&P CoreLogic Case-Shiller home price index, underlining the ongoing trend of the real estate market’s robust growth. However, the latest data also reveals notable regional disparities in the United States.
National rising home prices experienced a 0.7% month-to-month increase after seasonal adjustments. The 10-city composite displayed a gain of 1.1%, while the 20-city composite recorded a 1% rise. Though national prices were still 0.5% lower compared to May 2022, they are only 1% below their peak in June 2022.
On a yearly basis, the 10-city composite witnessed a decline of 1%, slightly less than the 1.1% drop in the previous month. Similarly, the 20-city composite reported a 1.7% decrease, aligning with the annual decline in April.
Craig Lazzara, managing director at S&P DJI, expressed optimism about the future months, attributing the recent price gains to a possible end of the price decline that began after June 2022. However, he cautioned that the extent of these gains could be affected by rising mortgage rates or general economic conditions.
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In terms of regional differences, Lazzara highlighted that certain cities in the Rust Belt were outperforming the rest of the nation. Chicago experienced a notable gain of 4.6%, followed by Cleveland with 3.9%, and New York with 3.5%, making them the top performers. This trend resulted in the Midwest overtaking the South as the strongest region in terms of home price performance.
The data also revealed that 10 out of the 20 cities in the composite saw lower prices for the year ending in May 2023 compared to the previous year ending in April 2023, while the remaining 10 cities witnessed higher prices.
Cities in the West, which had previously experienced significant inflation in prices, performed poorly in May. Seattle and San Francisco were the worst performers, with home prices declining by 11.3% and 11%, respectively.
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The surge in home prices stems from persistently low housing supply, with current homeowners reluctant to sell and benefiting from historically low mortgage rates. Despite the initial surge in mortgage rates, demand has bounced back as buyers adapt to the new market conditions.
Hannah Jones, a research analyst at Realtor.com, pointed out that while the housing market remains unaffordable for many buyers, competition remains high in certain markets due to limited inventory of existing homes. This has led to intensified bidding wars, reminiscent of the past few years.
Overall, the data illustrates the resilience of the housing market amid economic fluctuations, while also emphasizing the importance of considering regional variations in housing performance.