Home Prices Show Resilience Despite High Mortgage Rates

According to the recently released S&P CoreLogic Case-Shiller index report, home prices in the US continued to increase in June due to low supply and high demand, despite rising mortgage rates.

Why It Matters:

The resilience of home prices in the face of high mortgage rates highlights the strong demand for housing and the impact of limited supply. This has implications for potential homebuyers and the overall housing market.

The Details:

• The S&P CoreLogic Case-Shiller home price index rose by 0.7% in June after a seasonal adjustment, marking the fifth consecutive monthly increase.

• The 10-City and 20-City composites also posted increases of 0.9%.

• Compared to June 2022, the home price index remained flat in June, a significant improvement from the previous month's loss of -0.5%.

• Chicago, Cleveland, and New York experienced the largest price gains on a year-over-year basis, while San Francisco and Seattle saw the largest declines.

• The Midwest remains the strongest region for home prices, followed by the Northeast, while the West continues to be the weakest region.

Renting remains an appealing option:

• The rental market is becoming an alternative for potential homebuyers who are priced out of the sales market.

• Increased demand for affordability is driving up prices in more affordable areas, while high-priced areas see lower demand.

The effect of mortgage rates:

• Mortgage rates have increased by more than 60 basis points since June, resulting in a negative impact on demand for homes.

• Despite the high prices, a modest uptick in supply has been observed. However, affordability challenges continue to hinder buyer demand.

Conclusion:

While the housing market remains strong, the impact of high mortgage rates and limited supply may lead to modest year-over-year price declines in many markets this fall. However, economists remain optimistic about the future of the housing market.