July home price gains cooled below the long-term trend as interest rates surged in April
Late summer 2024 was characterized by high mortgage rates and a continued cooling of the housing market. Unlike the spring or early summer of this year, July’s home prices were weighed down by interest rate pressures, and recorded gains were notably smaller than seasonally expected.
Although reluctant buyers stalled 2024 home sales activity to levels not seen since the Great Financial Crisis, expectations that the Federal Reserve will continue to cut rates influenced mortgage rates to decline and started to infuse some life back into the housing market.
According to CoreLogic pending home sales data, weekly pending home sales throughout August recorded a consistent annual gain that could spill over into the remainder of the year. Plus, with rates falling to their lowest levels since February 2023 and demand picking back up, home price gains are likely to return to their seasonal trajectory over the coming months.
July 2024 marked the thirteenth straight month of annual appreciation (Figure 1). While home prices continued to hit new highs, the CoreLogic S&P Case-Shiller Index slowed to a 5% year-over-year gain in July after peaking at 6.5% in both February and March of this year.
The moderation of monthly gains contrasts with the strong 2023 spring season. This comparison illustrates the impact of slowing housing demand on cooling price growth as mortgage rates remained volatile and rates surged during the spring homebuying season.
Still, the latest CoreLogic Home Price Index report forecasts home prices to increase 4.6% on average in 2024, following a 3.9% increase in 2023.
The non-seasonally adjusted, month-over-month index recorded a slight 0.11% increase in July, well below the 0.5% average July increase recorded between 2015 and 2019 (Figure 2) and is a clear contrast to the 0.6% monthly increase recorded in July 2023.
The 10-city and 20-city composite indexes also posted their thirteenth straight month of annual increases in July, up by 6.8% and 5.9%, respectively. However, the increases seen in both composite indexes also slowed from the March peak of 8.3% and 7.5%, respectively. Compared with the 2006 peak, the 10-city composite index is now 56% higher, while the 20-city composite is up by 63%. Adjusted for inflation, which is showing signs of easing, the 10-city index is now 6% higher than its 2006 level, while the 20-city index is up by 11% compared with its 2006 high point. Nationally, home prices are 20% higher (adjusted for inflation) compared with 2006.
In July, 18 out of 20 metros saw slowing price growth year over year compared with the previous month (Figure 3). Cleveland and Portland were the two metros to post stronger price appreciation than the month before, while San Diego and San Francisco posted the strongest deceleration in price growth in July.
New York, Las Vegas, and Los Angeles continued to lead the 20-city index, with respective annual gains of 8.8%, 8.2%, and 7.2%. While San Diego experienced notable deceleration in price growth, it remained the fourth-strongest appreciating market, with a 7.2% annual gain. Twelve metros saw annual price gains higher than the national 5.4% increase.
Denver and Portland, Oregon remained the slowest-appreciating markets in the 20-city index.
While home prices increased by 0.11% nationally from June to July, 10 metros recorded weaker monthly gains. Seven metros saw home prices decline during the month, with San Francisco leading with the largest decline of 1.1%. San Diego, Denver, and Los Angeles followed with similar declines. Historically, home prices tend to increase during the summer months. This was the first monthly decline for all seven metros.
Figure 4 summarizes the current year’s monthly changes in July compared with averages recorded between 2015 and 2019. Cleveland and Las Vegas posted the nation’s largest monthly gains, rising 1.1% and 0.9%, respectively. Over the course of 2024, Cleveland has remained the strongest appreciating market. Many other markets started the year relatively strong, such as San Francisco and Seattle, but cooled notably by July as affordability remains considerably more limited in those markets.
The month-over-month comparison of appreciation by price tier and location also reveals relative changes in demand across the country. In July, home price changes revealed wide variation across metros and price tiers. Four metros had consistent gains across price tiers, including New York, Las Vegas, Chicago, and Miami. New York’s price gains were relatively consistent across tiers while Las Vegas’ high tier dominated gains in that metro. San Francisco’s middle and high tier dominated losses while Los Angeles’ low tier saw the largest drop in prices in the low tier (Figure 5).
With the first rate cut behind us, there is a lot of anticipation around the impact of lower mortgage rates on the housing market as well as expected further rate declines. As noted, homebuyer demand is already showing signs of life, but many potential homebuyers may choose to wait for further declines or next year’s spring homebuying season.
Nevertheless, with for-sale inventory remaining in short supply, lower rates are likely to reignite home price growth, particularly in areas that showed notable cooling due to higher rates, such as West Coast metros. In addition, annual home price appreciation may pick up the pace in the coming months simply due to base effects like the cooling in home prices at the end of 2023.
Stay Current With the Latest Housing Market Trends
CoreLogic’s Office of the Chief Economist
The CoreLogic statements and information in this blog post may not be reproduced or used in any form without express written permission. While all the CoreLogic statements and information are believed to be accurate, CoreLogic makes no representation or warranty as to the completeness or accuracy of the statements and information and assumes no responsibility whatsoever for the information and statements or any reliance thereon. CoreLogic® is the registered trademark of CoreLogic Solutions, LLC.
