The persistent scarcity of available homes is propelling a surge in house prices despite the unprecedentedly high mortgage rates, marking the 11th consecutive month of ascent in home prices, as indicated by the S&P CoreLogic Case-Shiller 20-city price index, which revealed a 0.2 percent increase in December compared to the previous month, with a year-on-year surge of 6.1 percent (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
The prevailing scenario sees most homeowners benefitting from substantially lower interest rates on their mortgages compared to the current rates offered by lenders. Consequently, there’s a reluctance among these homeowners to part ways with their properties and incur new loans at higher rates, acting as a dampener on home sales but concurrently bolstering home prices and spurring residential construction (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
The Case-Shiller 20-city index is hailed as the foremost indicator of home prices in the United States, meticulously tracking repeat sales of homes to prevent distortions arising from the mix of homes sold in a given period. It encompasses not only sales within city centers but also those in the metropolitan vicinities surrounding the 20 largest U.S. cities (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
Notably, the Case-Shiller indexes represent three-month averages; thus, the December data amalgamates figures from November and October, encompassing transactions initiated as far back as August 2023, considering that home sales conclude 45 to 60 days post-transaction (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
The broader national index reflecting home prices also witnessed a 0.2 percent uptick in December, marking a 5.5 percent increase over the preceding year. Likewise, the 10-city index, which primarily focuses on major metropolitan areas, saw a similar 0.2 percent rise for the month, culminating in a seven percent surge over the past 12 months. Notably, all three indices have scaled to record highs (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
Throughout 2023, home prices experienced a consistent upward trajectory, save for a decline in January, which stands as the sole exception. The marginal monthly increase observed in December represents the most modest escalation since that particular downturn (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
Traditionally, the housing sector is deemed highly responsive to fluctuations in interest rates. However, the widespread adoption of low and fixed-rate mortgages during the pandemic and preceding periods has mitigated the anticipated impact of interest rate hikes by the Federal Reserve, making it anomalous for home prices to sustain such rapid and steady growth amidst climbing interest rates (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”).
The December figures aligned with the projections put forth by Wall Street analysts (“The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades”)
