Home prices continue to climb, reaching new highs despite signs of a cooling market. The latest S&P CoreLogic Case-Shiller U.S. National Home Price Index reported a 5.4% annual gain in June, setting a record even as the pace of growth shows signs of easing.
New York City, often seen as a bellwether for urban real estate trends, led the charge with a 9% year-over-year increase, nearly double the national average. This growth, however, comes amidst rising concerns about affordability.
The ongoing rise in home prices, especially in major urban centers, is making homeownership increasingly difficult for many Americans. Lisa Sturtevant, chief economist at Bright MLS, warns, “The upward pressure on home prices is making this the most unaffordable housing market in history.”
Despite mortgage rates hovering around 7% in June, the persistence of high prices has surprised many industry observers. Danielle Hale, chief economist at Realtor.com, forecasts a further slowdown in price growth, predicting an overall increase of just 4.6% for 2024.
While the market may be cooling, it’s crucial to understand the underlying factors driving these trends. Brian Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices, highlights a trend of lower-priced homes appreciating more across many cities.
He points out that “Looking at the last five years, 75% of the markets covered show low-price tiers rising faster than the overall market.” This trend is particularly pronounced in New York, where homes in the lower tier have appreciated nearly 20% more than the broader market in the past five years.
The disconnect between rising home prices and broader inflation remains a concern. Luke notes that home prices have recently outpaced inflation by an average of 2.8% – a full point above the 50-year norm. This suggests that while home price growth is slowing, the upward trend, despite economic headwinds, indicates underlying market drivers.
The looming question is whether the current trend points to a new normal or whether a sharper correction is on the horizon. The future of the housing market remains uncertain, and the dream of homeownership remains elusive for many Americans as the market navigates a complex economic landscape.
