By Lisa Sturtevant, PhD
Chief Economist, Bright MLS
The S&P CoreLogic Case-Shiller Home Price Index showed that home prices were rising strongly in November, despite mortgage rates hitting 23-year highs. According to the index, home prices rose 5.14% compared to a year ago. However, home prices fell 0.18% between October and November, the first monthly decline since January 2023.
Over the past four years, the Case-Shiller index shows that national home prices have risen by nearly 50%, though there is variation across markets. In the Miami metro area, for example, prices are up more than 70% from before the pandemic. By comparison, in the Washington D.C. metro area, prices have risen by about 34% over the same time period.
Low inventory has fueled widespread home price appreciation, and housing affordability hit a record low in 2023. Affordability challenges are taking a toll on prospective homebuyers, causing more individuals and families to delay buying a home and forcing some out of the market altogether.
Are there markets where we are close to hitting an affordability ceiling—that is, the point at which the combination of high prices and elevated mortgage rates reduces demand enough to slow, or even reverse, price growth?
Perhaps. But the main reason prices continue to rise is because inventory is so low, and there is little to suggest that the supply picture is going to change dramatically in 2024. But there is some evidence that some high-cost markets might be approaching price levels that cannot be sustained in 2024. In Seattle, for example, the Case-Shiller Home Price Index revealed that prices fell 1.4% between October and November, the third month in a row of price declines. Prices were down for the fourth consecutive month in the Denver metro area.
In 2024, home prices in some of these high-cost markets could continue to soften, but buyers should not expect major deals. By historical standards, housing demand is still very high, with Millennials at prime first-time homebuying ages. The supply of existing homes for sale will also remain low, with millions of homeowners sitting on sub-3% mortgage rates. Buyers will have more leverage in some markets, but they will still face a competitive market in 2024.
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