Case-Shiller Index: Home-price gains slow, but keep rising

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 Nov. 26, 2024, shows annual home-price growth increased in September 2024 by 3.9 percent. That’s a slight decrease from August’s 4.2 percent, ending a streak of consecutive all-time highs for the national index.

Case-Shiller Index shows prices still rising, but more slowly

In addition to the 3.9 percent overall increase, September values also increased annually, but not as fast, by other measures. Case-Shiller’s 10-city index rose 5.2 percent, down from 6 percent in August, and the 20-city index was up 4.6 percent, down from 5.2 percent. After seasonal adjustment, the national index increased 0.3 percent month-over-month, while the 10-city index rose 0.1 percent and the 20-city group was up 0.2 percent from the previous month.

“Home price growth stalled in the third quarter, after a steady start to 2024,” Brian D. Luke of S&P Dow Jones Indices said in a statement.

Regional fluctuation continues

Cities scattered across the East, West and Midwest all earned top-five spots in price growth for September. New York City tops the annual-growth pack once again, with the New York metro area reporting an annual gain of 7.5 percent. The cities with biggest increases were:

• New York City (7.5 percent)
• Cleveland (7.1 percent)
• Chicago (6.9 percent)
• Las Vegas (6.7 percent)
• Detroit (5.3 percent)
• Washington, D.C. (5.3 percent)

“The South region reported its slowest growth in over a year, rising 2.8 percent, barely above current inflation levels,” said Luke. The metro area that saw the slowest rate of growth was Denver, at a tiny 0.2 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, and followed by another in November. 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 Nov. 20, 2024, Bankrate’s weekly lender survey puts the average 30-year mortgage rate at 7.02 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, sees reason for hope in this month’s slight Case-Shiller drop: “Sales prices of existing homes falling is a bit of good news for buyers, and while 2024 will go down as one of the worst years for sales, maybe we’re finally seeing a sustained deceleration in price increases,” he said. “With mortgage rates up recently, the price drop will be lost in overall housing affordability. But together with lower mortgage rates next year, as many are forecasting, a slowdown in price increases could mean markedly improving conditions for buyers in 2025.”