Home prices surged in November despite elevated mortgage rates

Home prices maintained considerable momentum in late 2023. The S&P CoreLogic Case-Shiller U.S. National Home Price Index posted a 5.1% annual gain in November, up from a 4.7% gain in October, according to the latest report.

Meanwhile, the U.S. National Index and the 10-City Composite posted month-over-month increases of 0.2%, and the 20-City Composite posted a month-over-month increase of 0.1%, after seasonal adjustment.

“Home price growth continued to accelerate through the winter and registered solid monthly gains despite a mortgage rate surge before the Fed December meeting which weighed heavily on already existing affordability challenges,” CoreLogic chief economist Selma Hepp said in a statement. “With mortgage rates now lower and spring home buying demand already lurking, home prices will continue to rise, especially considering the outsized pent-up demand for homes coming from young buyers, those who have been waiting for lower rates, and huge influx of immigrants over the last couple of years.”

This month’s index data tracks September, October, and November, a period through which mortgage rates fluctuated from 7.1% in September to 7.8% by the end of October, before falling back to 7.2% by the end of November. The Case-Shiller index measures repeat sales data and reflects a three-month moving average.

Detroit held its position as the best-performing market for the third month in a row

Markets in the Northeast and the Midwest posted some of the fastest-growing home prices while some Western markets are picking up. Detroit (+8.2%), San Diego (+8.0%), New York, and Cleveland (both +7.4%) posted the biggest year-over-year price gains.

“Barring a late surge from another market, those cities will vie for the ‘housing market of the year’ as the best-performing city in our composite,” S&P DJI’s head of commodities, real and digital assets Brian Luke said in a statement.

By contrast, Portland (-0.7%), Denver (+1.5%), and Seattle (+1.6%) registered the slowest growth from a year ago. All these markets are located in the West. 

Home prices might ease in 2024 but buyers should not expect discounts

The constrained housing inventory is keeping home prices elevated, and the supply picture is unlikely to change dramatically in 2024, according to Bright MLS chief economist Lisa Sturtevant. 

However, there is some evidence that home prices might start to ease in certain markets. For instance, the Case-Shiller Home Price Index revealed that prices fell 1.4% between October and November in Seattle, posting the third monthly decline.

“In 2024, home prices in some of these high-cost markets could continue to soften but buyers should not expect major deals,” Sturtevant said in a statement. “By historical standards, housing demand is still very high, with Millennials in prime first-time homebuying ages. The supply of existing homes for sale will also remain low, with millions of homeowners sitting on sub-three percent mortgage rates. Buyers will have more leverage in some markets, but they will still face a competitive market in 2024.”