While market-watchers wait to see how much lower mortgage rates might go, housing prices in the U.S. continue to rise ever higher. S&P CoreLogic’s latest Case-Shiller U.S. National Home Price NSA Index, released September 24, 2024, reports that annual home-price growth increased in July 2024 by 5.0 percent. That marks another new all-time high — the 14th consecutive one for the national index, accounting for seasonality.

Case-Shiller Index shows home prices still rising

In addition to the 5.0 percent overall increase, July numbers increased annually for both of Case-Shiller’s composite indices as well, with the 10-city index up 6.8 percent and the 20-city index up 5.9 percent. After seasonal adjustment, the national index increased 0.2 percent month-over-month, while both composites rose 0.3 percent from last month.

“Accounting for seasonality of home purchases, we have witnessed 14 consecutive record highs in our national index,” said Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices, in a statement. “While the S&P 500 has achieved 39 record highs and the S&P GSCI Gold TR hit 35 record highs, housing is following a similar trajectory.”

Regional fluctuation continues

East Coast and West Coast continue to battle it out for the top spot in price growth. New York City tops the annual-growth pack once again in July, after ending a several-month run by San Diego. The Big Apple reported an annual gain of 8.76 percent, while San Diego has now fallen to the fourth spot, edged out by two other Western cities. The cities with biggest increases were:

  • New York City (8.76 percent)
  • Las Vegas (8.24 percent)
  • Los Angeles (7.23 percent)
  • San Diego (7.19 percent)
  • Cleveland (6.97 percent)

The city that saw the slowest rates of growth was once again Portland, at 0.84 percent.

Today’s regional outlook is different than it has been historically. For the past 20 years — July 2004 through July 2024 — Seattle had the highest appreciation at 198 percent. Other strong performers included Dallas (up 158 percent in two decades) and Charlotte (up 148 percent). Just outside the top five were Phoenix, Miami and Tampa, all of which experienced home price gains of 142 percent over the past 20 years. Those three markets were flooded with new arrivals during the pandemic.

Nationally, appreciation was 114 percent. Meanwhile, cumulative inflation was 66 percent over that timeframe.

The bottom five includes Cleveland (64 percent appreciation over two decades) and Detroit (57 percent), both of which have been struggling for decades with the decline of the manufacturing sector. Minneapolis (54.8 percent), Las Vegas (54.5 percent) and Chicago (46 percent) also ranked at the bottom of the pack.

The Fed and the housing market

The Federal Reserve announced its first interest-rate cut in years in September. But before that, its aggressive moves to combat inflation — with 10 consecutive rate hikes over 2022 and 2023 — put upward pressure on mortgage rates, even as inflation declined. While the Fed doesn’t directly set mortgage rates, the mortgage market’s interpretations of the central bank’s moves influence how much you pay for your home loan.

The long period of low mortgage rates following the Great Recession came to an end in 2022. In June 2022, rates topped 6 percent for the first time since 2008. The upward trend continued through October 2023, when rates hit a 23-year high of 8 percent. Steve Reich, divisional vice president at CrossCountry Mortgage in Pennsylvania, highlights the impacts that these trends have on the housing market: “As the Fed worked to get inflation under control, higher interest rates tempered what many homebuyers could afford and, in turn, softened home sales,” he said in a statement.

Higher rates also exacerbate the housing shortage, stopping many homeowners from selling when they otherwise might — and thus keeping those homes off the market and out of the supply of available housing.

The remarkable rise in mortgage rates is acting as a kind of golden handcuffs. — Mark Hamrick, Bankrate Senior Economic Analyst

“The remarkable rise in mortgage rates is acting as a kind of golden handcuffs,” says Mark Hamrick, Bankrate’s senior economic analyst. Higher rates are “limiting the desire and some of the ability of people to move out of the homes they currently own. That further pressures housing inventory, adding insult to supply injury.”

While that effect may ease up as the market adjusts and mortgage rates inch downward, for now rates remain relatively elevated: As of September 18, 2024, Bankrate’s weekly lender survey puts the average 30-year mortgage rate at 6.20 percent.

What the Case-Shiller Index means for homebuyers and sellers

The current market has proved challenging on both sides of the real estate transaction — and unless we see a significant drop in either home prices or mortgage rates, both buyers and sellers will need to go with the flow. “For prospective sellers, the new status quo dictates they remain flexible on price,” Hamrick says.

“Those who are very motivated to purchase a home should be prepared for the sticker shock associated with the increased expense of financing the purchase,” he continues. “Part of the flexibility that may be required includes seeking a possible downgrade of footprint or quality of home, along with the neighborhood, in order to achieve an affordable purchase.”

Robert Frick, corporate economist with Navy Federal Credit Union, warns hopeful buyers that lower rates may lead to higher prices: “Recent lower mortgage rates may cause more demand for houses, bidding up their prices even more,” he said in a statement. “The only fix for high prices is to increase the number of homes, especially starter homes, which severely lag demand.”

However, Reich emphasizes that buying a home in today’s market, while difficult, is still possible. “The average time active listings stay on the market is getting longer, resulting in a slightly less competitive market,” he says. National Association of Realtors data proves that out: The median days-on-market length was 26 days in August, up from 20 days in August of last year, which gives buyers a bit more time to make an informed, well-considered decision. “And that’s good news for homebuyers who are still in the game.”