Monthly appreciation in April bucked the seasonal trend under the pressure of high mortgage rates, with a 1.2% increase
The housing market remains divided between tenure status (homeowners and non-homeowners) and across geographies. Current homeowners have been in an exceptional position to build home equity and wealth, while those trying to enter the market are facing historic affordability challenges.
As a result, areas with higher accumulated equity and stronger job and wage markets continue to perform well under the weight of high mortgage rates, while markets where homeowners have less wealth to bring to the homebuying process are buckling under the cost pressure. Geographically, housing markets continue to differ between those where the inventory of existing homes for sale are rising and those that continue to severely lack existing homes but also newly constructed ones. Also, the surging cost of non-mortgage homeownership expenses, such as insurance and taxes, are also weighing on buyers in some markets.
In April, the CoreLogic S&P Case-Shiller Index slowed to a 6.3% year-over-year gain after peaking at 6.5% during the previous two months. It was still the 10th straight month of annual appreciation (Figure 1). Again, the slowing of yearly gains largely reflects a comparison with the strong 2023 spring season, while persistent monthly gains this year suggest that home prices continue to hit new highs and are now up by 4% compared with the June 2022 peak.
In addition, the non-seasonally adjusted month-over-month index continued to show a solid seasonal increase, up by 1.2%, higher than the 1.05% increase recorded on average between 2015 and 2019 (Figure 2) in April. Last spring, when home price growth heated up beyond the seasonal trend, April’s monthly increase was 1.4%.
The 10-city and 20-city composite indexes also posted their 10th straight months of annual increases in April, though both also slowed from the March peak, up by 8% and 7.2%, respectively. The 10-city index includes currently better-performing metro areas such as New York and Chicago, which have seen relatively stronger housing markets since mid-2022, as the return to cities and offices continues. On the other hand, among markets in the 20-city index, the resetting continues for pandemic-era boomtowns, which then saw excessive gains in home prices, while markets with strong appreciation over the last year continue to cool, including Tampa, Florida and Detroit.
Compared with the 2006 peak, the 10-city composite index is now 53% higher, while the 20-city composite is up by 60%. Adjusted for inflation, which is showing signs of easing, the 10-city index is now 4% higher than its 2006 level, while the 20-city index is up by 8% compared with its 2006 high point. Nationally, home prices are 17% higher (adjusted for inflation) compared with 2006.
In April, 19 out of 20 metros saw slowing price growth year over year compared with the previous month (Figure 3), with only Las Vegas posting another month of accelerated price growth – up by some 0.6 percentage points.
San Diego, New York, Chicago and Los Angeles maintained the lead in the 20-city index, with respective annual gains of 10.3%, 9.4%, 8.7% and 8.6%. Again,12 metros saw annual price gains higher than the national 6.3% increase. And while San Diego recorded the fourth month of double-digit annual increases in April, it saw the fastest rate of cooling compared with the previous month, down by 0.9 percent points. Washington, D,C. and Boston followed for slowing annual growth.
Portland, Oregon and Denver were again the slowest-appreciating markets, up by less than 2% compared with last year.
While home prices increased by 1.2% nationally from March to April, 11 metros recorded stronger monthly gains. Figure 4 summarizes the current year’s monthly changes in April compared with averages recorded between 2015 and 2019.
Boston, San Francisco and Seattle posted the nation’s largest monthly gains, a respective 2.2% and 2% for the latter two. In Boston, the monthly gain was notably higher than the average seen before the pandemic. No metro recorded a month-over-month decline in home prices in April. Phoenix, Tampa and Miami saw the slowest gains, a trend that continues to correlate with a considerable increase in new listings this spring, which may be driving some of price moderation. Other markets, such as Charlotte, North Carolina; Dallas; Washington and Portland saw relatively weaker appreciation in April compared with markets in the Midwest and West (Figure 4).
The month-over-month comparison of appreciation by price tier and location also reveals relative changes in demand across the country. In April, all metros and price tiers saw home prices increase. Tampa, where home prices were weak in the previous month – particularly in the low tier – showed a solid appreciation across tiers. High-tier home prices were on average up at the fastest pace, by 1.5%, while the middle tier was up by 1.4% and the low tier by 1.3%. The high tier in Boston and Seattle, as well as the middle tier in San Francisco, appreciated by more than 2.5% (Figure 5).
Moving forward, home price growth will continue to slow as the residual impacts of strong 2023 home price gains fade. However, monthly home price increases are likely to remain robust. As witnessed over the last couple of years, home prices have been largely impervious to higher mortgage rates and soaring homeownership costs in many markets and particularly for the high-tier segment of the housing market. This has been in part due to existing homeowners in high-growth markets cashing in their accumulated home equity and having larger down payments or all cash to pay for their new homes.
As CoreLogic’s Homeowner Equity report continues to show, increases in prices are helping current homeowners build equity, which in turn can be used to purchase another home. San Francisco, Boston and Seattle are among the markets with the highest accumulated equity among borrowers, but these are also metros with generally higher incomes.
Unfortunately, what higher homeownership costs mean for first-time buyers is that it is increasingly more unaffordable and challenging to enter the housing market. Given the continued expectation of increasing home prices, only a decline in mortgage rates and/or an increase in wages will help improve the affordability gap.
