Detroit saw the highest jump in home prices, according to the S&P CoreLogic Case-Shiller national home price index, in what was the ninth straight month of price gains for the market, illustrating the challenge of affordability for buyers dreaming of owning a home.
The Michigan city saw a more than 8 percent jump in prices in October, the highest of the 11 major metropolitan areas that saw increases. Miami, Atlanta, Chicago, Boston, Detroit, Charlotte, New York and Cleveland hit all-time highs in prices, according to the S&P CoreLogic Case-Shiller data released on Tuesday.
"U.S. home prices accelerated at their fastest annual rate of the year in October," Brian D. Luke, Head of Commodities, Real & Digital assets at S&P DJI, said in a statement. "Our National Composite rose by 0.2% in October, marking nine consecutive monthly gains and the strongest national growth rate since 2022."
The housing market has struggled this year under the weight of historic high mortgage rates and elevated prices which have made it tough for buyers to get in on the market. While recent declines in rates have injected some optimism in the sector, persistently expensive homes in the market are still making it tougher for prospective home purchasers to acquire a house.
Analysts suggested that the data released on Tuesday captures a period when rates soared to 8 percent, the highest level since the turn of the century, and those who could afford those mortgages were dealing with a limited supply of homes which in turn boosted prices.
"Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher," Luke said.
Areas that saw an increase in prices were in parts of the country that are attracting new residents, who are also helping to push up prices, said reatlor.com's chief economist Danielle Hale.
"Stronger local economies and more favorable affordability are propelling price growth in these areas," she said in a note.
Mortgage rates have decelerated over the last few weeks. The 30-year fixed mortgage rate dropped to 6.67 percent while the 15-year fixed mortgage rate crossed under 6 percent to settle at an average of 5.95 percent for the week ending December 21, according to Freddie Mac. The popular 30-year fixed rate had hovered around 7 percent for about four months.
There is not enough evidence to suggest that the drop in rates has sparked sales, Hale said, but that development may give buyers some relief. Sales of new homes dropped in November amid the decline in mortgage rates even as used homes saw an improvement after being frozen for months.
"November existing home sales increased for the first time in 5 months, suggesting that if rates can hold onto recent improvements, buyer demand may be sufficient to drive a stronger home sales season than originally anticipated," she said.
The question remains as to when house prices will decline, as the market is still struggling to produce enough homes to meet demand. Experts say the market is short at least 4 million homes to meet the needs of buyers.
"Today's S&P CoreLogic Case-Shiller Index showed the persistence of home prices amid limited inventory even in the face of lower sales activity," Hale said. "Although price growth decelerated month-over-month, the year-over-year gains were larger than in September."
Housing economists say that prices may decline if buyers have more options for what to buy in the market.
"Home price appreciation can only moderate from drastically improved supply," Lawrence Yun, The National Association of Realtors' chief economist, said recently.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
