The cooling effect of elevated mortgage rates and affordability challenges on home prices has held firm in recent months, as new reports show that the price tags for homes in the U.S. have seen their first annual decline in over a decade.
According to the latest S&P Case-Shiller Index, home prices decreased 1.2% year-over-year in April, marking the first annual dip since 2012. Despite the milestone, experts suggest that prices may have “bottomed out” in April ahead of a potential rebound.
Annually, the 10- and 20-City indexes dipped 1.2% and 1.7%, respectively. According to the report, 10 of the 20 metros analyzed reported lower prices in March than last year.
Despite the YoY decline, the national index has held its monthly upward trajectory. The report shows that prices increased by 1.3% from March to April, while the 10-City and 20-City Composites posted gains of 1.7% each.
Miami, Chicago and Atlanta reported the highest annual gains among the 20 cities in March, climbing 5.2%, 4.1% and 3.5%, respectively.
The complete data for the 20 markets measured by S&P:
Atlanta, Georgia
April/March: 1.3%
Year-Over-Year: 3.5%
Boston, Massachusetts
April/March: 2.9%
Year-Over-Year: 0.9%
Charlotte, North Carolina
April/March: 1.4%
Year-Over-Year: 3.4%
Chicago, Illinois
April/March: 1.8%
Year-Over-Year: 4.1%
Cleveland, Ohio
April/March: 2.3%
Year-Over-Year: 2.9%
Dallas, Texas
April/March: 1.4%
Year-Over-Year: -2.9%
Denver, Colorado
April/March: 1.6%
Year-Over-Year: -4.5%
Detroit, Michigan
April/March: 2.3%
Year-Over-Year: 1.1%
Las Vegas, Nevada
April/March: 0.7%
Year-Over-Year: -6.6%
Los Angeles, California
April/March: 1.7%
Year-Over-Year: -3.2%
Miami, Florida
April/March: 0.9%
Year-Over-Year: 5.2%
Minneapolis, Minnesota
April/March: 1.7%
Year-Over-Year: 0%
New York, New York
April/March: 1.5%
Year-Over-Year: 3%
Phoenix, Arizona
April/March: 0.7%
Year-Over-Year: -6.1%
Portland, Oregon
April/March: 1.5%
Year-Over-Year: -5.2%
San Diego, California
April/March: 2%
Year-Over-Year: -5.6%
San Francisco, California
April/March: 2.2%
Year-Over-Year: -11.1%
Seattle, Washington
April/March: 2.3%
Year-Over-Year: -12.4%
Tampa, Florida
April/March: 0.8%
Year-Over-Year: 2.4%
Washington, D.C.
April/March: 1.6%
Year-Over-Year: -0.5%
The takeaway:
“The U.S. housing market continued to strengthen in April 2023, says Craig J. Lazzara, managing director at S&P DJI. “Home prices peaked in June 2022, declined until January 2023, and then began to recover. The ongoing recovery in home prices is broadly based.
“If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April’s data would bolster my argument. Whether we see further support for that view in coming months will depend on how well the market navigates the challenges posed by current mortgage rates and the continuing possibility of economic weakness,” Lazzara concluded.
“Today’s S&P CoreLogic Case-Shiller Index reinforced the idea that home prices are responsive to interest rate adjustments, as home shoppers continue to push budget boundaries in today’s pricey housing market,” said Danielle Hale, chief economist at realtor.com®.
“Home price trends are caught in a tug of war between stretched buyer budgets and limited inventory, forcing competition despite reduced affordability. With high mortgage rates keeping one in seven homeowners from selling, new listings have lagged far behind what we’ve seen in prior years, pushing buyers to continue to bring their best offers even as home sales were 20% lower than at this time last year.
“Our revised 2023 housing outlook expects modest price cooling to continue as affordability slowly wins out. But as we’ve seen in the data, price trends will vary from market to market.
“This somewhat mirrors trends in the rental market where pricey Western metros have seen rents decline, but unlike in the for-sale market, the affordable Midwest and cities in the Northeast have seen greater price increases than the South. With a record level of multifamily units under construction, renters are expected to see additional relief in the form of continued modest rent declines. The recent pick-up in single-family home construction, if sustained, will be a welcome relief valve for homebuyers frustrated by limited options stemming from long-term underbuilding and help usher in the gradual return of housing affordability,” Hale concluded.
“Home prices may have bottomed out in April with a summer rebound on the way in this surprisingly resilient housing market,” said Lisa Sturtevant, chief economist at Bright MLS. “The S&P CoreLogic Case-Shiller Home Price Index fell by 0.2% between April 2022 and April 2023, the first year-over-year decline since 2012. Elevated mortgage rates and affordability challenges have put downward pressure on home prices, especially in high-cost markets in the West.
“This could be the turning point for home prices, however. More recent data from Bright MLS shows the median price in the Mid-Atlantic rose by 0.3% year-over-year, with the strongest price growth in the region’s smaller metros. List prices were up in the Mid-Atlantic last week, and buyers are typically paying over the seller’s asking price.
“Rising mortgage rates were supposed to quell homebuyer demand and push home prices down. As rates escalated last year, buyer activity did stall. However, higher mortgage rates have not dampened buyer interest as much as many thought—or hoped—they would. As a result, while the Case-Shiller index showed a decline in April, the big home price drops some had predicted have not materialized.
“The key reason home prices in most markets are stable or rising is that there are a lot of buyers competing over a very low supply of homes available for sale. Inventory is going to remain low for years, as existing homeowners are ‘locked in’ to extremely low mortgage rates and people are remaining in their homes longer. But there could be some additions to the inventory in the second half of the year. New home building has been ramping up, accounting for a growing share of the housing inventory in recent months. Some homeowners who are living in homes that are not right for them will be enticed to list their home for sale later this year as they come to terms with mortgage rates above 6% as the new normal,” Sturtevant concluded.
