Case-Shiller Index: Home-price gains reach another all-time high

U.S. home prices just keep setting new records, although the pace of growth has slowed a bit. S&P CoreLogic’s latest Case-Shiller U.S. National Home Price NSA Index, released Oct. 29, 2024, shows annual home-price growth increased in August 2024 by 4.2 percent. That marks another new all-time high — the 15th consecutive one for the national index, accounting for seasonality.

Case-Shiller Index shows home prices still rising

In addition to the 4.2 percent overall increase, August values increased annually by other measures. Case-Shiller’s 10-city index rose 6 percent and the 20-city index was up 5.2 percent. After seasonal adjustment, the national index increased 0.3 percent month-over-month, while the 10-city index rose 0.3 percent and the 20-city group was up 0.4 percent from the previous month.

“Home price growth is beginning to show signs of strain, recording the slowest annual gain since mortgage rates peaked in 2023,” Brian D. Luke of S&P Dow Jones Indices said in a statement. “As students went back to school, home-price shoppers appeared less willing to push the index higher than in the summer months.”

Regional fluctuation continues

East, West and Midwest cities all earned top-five spots in price growth for August. New York City tops the annual-growth pack once again, with the New York metro area reporting an annual gain of 8.1 percent. The cities with biggest increases were:

• New York City (8.1 percent)
• Las Vegas (7.28 percent)
• Chicago (7.23 percent)
• Cleveland (6.9 percent)
• Detroit (5.98 percent)

The metro areas that saw the slowest rates of growth were Denver, at 0.67 percent, and Portland, 0.81 percent.

Historically, the picture is different. 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.

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,” 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 Oct. 23, 2024, Bankrate’s weekly lender survey puts the average 30-year mortgage rate at 6.78 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 says. “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 affordability remains a challenge: “The rate of home price increases may have slowed, but that’s cold comfort as prices hit a new high and mortgage rates have rebounded,” he said. “A strengthening economy and economic uncertainty are conspiring to push up the 10-year Treasury yield, which is elevating the 30-year mortgage rate. Home shoppers may not see relief in terms of lower mortgage rates until next year, and home prices are forecast to keep increasing in 2025.”