Home prices continued ascent in September despite soaring mortgage rates: Case-Shiller

This Rust Belt city saw the biggest gain in home prices

Higher borrowing costs haven't dampened home prices yet, according to the latest S&P Case-Shiller report.  (iStock)

Home prices showed no signs of slowing in September despite the record-high mortgage rates that rendered housing unaffordable for many Americans, according to the latest S&P CoreLogic Case-Shiller Indices report.

Nationwide, home prices rose by 0.3% in September and now stand 3.9% above its year-ago level. The 10-city composite gained 4.8% and the 20-city composite increased 3.9% – the indices measure home prices in major metros across the country. Both indices posted a 0.7% month-over-month increase in September.

Home prices now stand 6.6% above where they started the year despite rising mortgage rates. The September Case-Shiller tracks July, August and September when mortgage rates climbed steadily from 6.8% at the beginning of July to 7.3% by the end of September. At the same time, housing inventory has remained low. Existing home sales dropped 2% in September to a 13-year low, according to research from Realtor.com.

"Speeding up of annual home price growth reflects much of the pent-up demand that exists in the housing market amid very low inventories," CoreLogic Chief Economist Dr. Selma Hepp said in a statement. "Nevertheless, home prices are feeling the weight of high mortgage rates, which will slow the rate of price growth in the coming months. Still, despite the dramatic increase in the cost of homeownership, home prices have risen 6.4% this year – meaningfully beyond expectations given the rise in borrowing costs."

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New home sales increase

Although existing home sales are down, new home sales rose 17.7% year-over-year, according to a joint report from the U.S. Department of Housing and Urban Development and the Census Bureau. In October 2023, new home sales were at a seasonally adjusted annual rate of 679,000. This is 5.6% below the revised September rate of 719,000 but is above the October 2022 estimate of 577,000.  

"Today's S&P CoreLogic Case-Shiller Index showed the impact of housing demand met with limited supply, as home prices continued on their upward trajectory into the early fall," Realtor.com Sr. Economic Research Analyst Hannah Jones said. "As a result, while existing home sales fell in September, pending home sales and new home sales – both of which are based on contract signings – ticked up compared to the previous month, indicating slightly more energy in the housing market looking forward."

Part of what is driving buyers is concern over where rates may head next, according to Jones. At the start of the year, buyers were more hopeful home prices would drop and were not expecting the increase in mortgage rates during the latter half of the year.

"Mortgage rates climbed through this period, and while higher rates generally hurt buyer demand, a renewed climb can encourage shoppers to lock in a rate before it moves higher," Jones said. "In fact, 46% of consumers in a September survey reported expecting mortgage rates to climb higher in the next 12 months." 

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These cities saw the most significant house price gains

Detroit, San Diego and New York led the way for the fastest-growing cities in the U.S. Detroit reported the highest year-over-year growth, with an annual increase of 6.7%. San Diego and New York followed with gains of 6.5% and 6.3%, respectively.

September's worst-performing cities were Las Vegas, Phoenix and Portland. Las Vegas saw the most significant year-over-year decline, with prices dipping 1.9%. Phoenix and Portland followed with a decrease in growth of 1.2% and 0.7%, respectively. 

"We've commented before on the breadth of the housing market's strength, which continued to be impressive," S&P Dow Jones Managing Director Craig Lazzara said. "On a seasonally adjusted basis, all 20 cities showed price increases in September; before seasonal adjustments, 15 rose. Prices in 17 of the cities are higher than they were in September 2022. Notably, the National Composite, the 10-City composite, and 10 individual cities (Atlanta, Boston, Charlotte, Chicago, Cleveland, Detroit, Miami, New York, Tampa, and Washington) stand at their all-time highs."

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