January home prices show steady annual gain, but month-to-month comparison tells another tale: Case-Shiller

Home prices recorded another gain in January, but a month-to-month comparison showed values losing some ground, according to the latest S&P CoreLogic Case-Shiller Indices report.

Home prices are now 6% above their level this time last year, up from 5.6% last month. The 10-city composite increased by 7.4% annually, up from 7% the previous month. At the same time, the 20-city composite posted a rise of 6.6%, up from 6.2% the previous month. 

Month-to-month, home prices struggled because of high mortgage rates and a lack of housing supply. While the 10-city composite registered no growth,  the 20-city composite decreased by 0.1%—the indices measure home prices in major metros across the country.   

"Homeowners most likely saw healthy gains in the last year, no matter what city you were in, or if it was in an expensive or inexpensive neighborhood," S&P Dow Jones Indices Head of Commodities Brian Luke said. "No matter which way you slice it, the index performance closely resembled the broad market."

"On a monthly basis, home prices continue to struggle in the face of elevated borrowing costs," Luke continued. "Seventeen markets dropped over the last month, while Minneapolis has posted a 2.4% decline over the prior three months."

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Spring buying will likely be tamed by still-too-high borrowing costs and limited housing inventory, two factors that have helped prop home prices up. However, improving for-sale options and the promise of an interest rate cut sometime in the summer mean relief is on the way.

At its latest meeting, the Federal Reserve said it would continue to monitor inflation and other economic indicators to determine when to lower rates. Market expectations are that the first rate cut will come in the summer, if not later in the year. 

Meanwhile, housing inventory is improving. In February, housing starts climbed 5.9% year-over-year and home completions were 10.7% higher annually, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, signaling potentially more home options in coming months. 

Overall, housing supply has improved, as the number of homes for sale increased by 14.8% compared to last year and grew for the fourth straight month, according to a report by Realtor.com.  

"While elevated mortgage rates continued to freeze housing market activity over the winter, an unthawing is in sight, with improvements in for-sale inventory offering more opportunities for potential buyers across the country," CoreLogic Chief Economist Selma Hepp said. "With spring's arrival, home prices are likely to show a seasonal uptick, although the annual acceleration in gains will slow compared with the strong 2023 spring. Nevertheless, more inventory is a welcome development and suggests that some normalization in the U.S. housing market lies ahead."  

Homebuyers can find the best mortgage rate by shopping around and comparing your options. You can visit an online marketplace like Credible to compare rates, choose your loan term and get preapproved with multiple lenders at once.

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A new initiative recently launched by President Joe Biden to improve affordability and supply issues could help increase demand for housing in the current high-rate environment. Biden has called on Congress to invest more than $175 billion in affordable housing initiatives, according to a White House statement. 

In his State of the Union address earlier this month, Biden called on Congress to create legislation giving a $10,000 tax credit to first-time homebuyers and those who sell their starter homes. This move would help middle-class Americans cope with higher borrowing costs while incentivizing existing homeowners to sell more homes.

"Home price growth will likely not surge going into the Spring home buying season, as home sales are fairly stagnant at this moment," Max Slyusarchuk, CEO of A&D Mortgage said. "We do believe rates will begin to drop in the second half of the year, and that will help pick up home sales, which will be buoyed by stable home values." 

If you are looking to take advantage of the current mortgage rates by refinancing your mortgage loan or are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.

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