Market Update: Home Prices Reach All-Time High in December; Will They Continue Climbing?

Blog posted On February 27, 2024

Mortgage rate trends have been relatively unchanged over the past week. Home price appreciation, on the other hand, has changed quite a bit over the past four years. According to Case-Shiller home price data released this morning, prices have surged 46% since 2019. They reached a new all-time high in December after climbed 0.2% month-over-month. This puts buyers in an increasingly difficult position, wedged between higher-trending interest rates and soaring home prices. Read more about what the experts are saying.

2023 home price growth: highest in 35 years

Despite seeing the highest mortgage rates in decades last year, home prices continued to increase. In fact, their growth in 2023 outpaced the average annual home price gain over the past 35 years. To some, this might seem shocking. With higher interest rates keeping many buyers on the sidelines, how are prices still being pushed higher? Where is that pressure coming from? One cause is inflation, which was notably high in 2022-23. Another is the very limited supply of available homes for sale. Existing home sales, which make up roughly 90% of all home sales, struggled last year because not many sellers were putting their homes on the market.

Will prices cool off this year?

If you’re waiting for a huge drop in home prices, you might be disappointed. Prices are still expecting to see gains this year. But there are a couple of bright spots to this.

1. Rising prices are good for homeowners – with rising prices, comes increasing home value and wealth
   1. So if you CAN purchase a home now, you’ll be rewarded with solidly increasing wealth
2. The pace of rising prices is expected to slow – offering hope for buyers

New home sales continue to climb

With limited existing homes available for purchase, many buyers are turning to new homes. In January, new home sales inched up 1.5% month-over-month. “The sharp fall in mortgage rates at the end of last year helped new home sales regain some more momentum in January,” wrote Thomas Ryan, property economist at Capital Economics. “But so far the rebound has been slower than we were anticipating. Looking ahead, we still expect further falls in mortgage borrowing costs and the historically low supply of secondhand homes on the market to drive demand towards newbuilds,” Ryan added. Amid the lack of existing homes, new home sales have been making up 14-15% of total home sales versus 8-9% historically.

Coming up…

Rounding out the week we have inflation numbers coming out on Thursday with January’s Core PCE index. We’ll also see pending home sales data come out that day. On Friday, we’ll see construction spending numbers.

Sources: Bloomberg, Market Watch, Mortgage News Daily,