California City Breaks the Record of Troublesome Housing Market

According to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, house prices rose nearly 9 percent year over year in December. This was part of a larger trend of gains across the country that month. This was because mortgage rates fell from their highest levels in 20 years in the fall.

It looked at 20 big metro areas, and prices went up in 17 of them. Los Angeles and Detroit, among other cities, also saw big value gains of 8.3 percent per year. In December, prices rose by more than 6 percent in 20 of the places that the index tracked, which was more than the 5.4 percent rise the previous month. In the nine U.S. census areas, home prices went up by 5.5%, which is more than the 5% rise seen in November. According to the figures, the national index went down by 0.4% in December.

Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P Dow Jones Indices, said that house prices have solved big problems in 2023. Buyers and sellers have been staying away from the market because mortgage rates are too high.

“However, on a seasonally adjusted basis, the S&P Case-Shiller Home Price Indices continued its streak of seven consecutive record highs in 2023,” Luke said in a press release. “Ten of 20 markets beat prior records, with San Diego registering an 8.9 [percent] gain and Las Vegas the fastest rising market in December.”

In 2023, prices went up every year for the first time in twenty markets, and in four of those, they went up by more than 8 percent. “The term ‘a rising tide lifts all boats’ seems appropriate given broad-based performance in the U.S. housing sector,” said Luke.

Also Read: Most Homebuyers Want to Move in this California City

Mortgage rates hit an all-time high of 8% in October, the highest number seen since the turn of the century. One reason for this was that the Federal Reserve boldly raised its funds rate to fight record-high inflation. The central bank’s interest rates are now at their highest level in twenty years, between 5.25 and 5.5%. This strategy has made it more expensive to borrow money across the economy, including for home loans.

Bill Adams, chief economist for Comerica Bank, told Newsweek in a note that house prices finally went up in 2023 after going down from the middle of 2022 to the start of 2023 because of rising interest rates, high inflation, and a bear market in stocks. Luke says that the 5.5% price increases seen in the index in 2023 were higher than the national average of about 5%, even though they were lower than in previous years.

“While we are not experiencing the double-digit gains seen in the previous two years, above-trend growth should be well received considering the rising costs of financing home mortgages,” said Luke. Prices might have gone up in the fourth quarter of 2023 because mortgage rates went up, he said.

While we wait, we should be able to see how higher mortgage rates affect home prices in the short run. Luke said that higher financing costs seemed to be the cause of falling home prices in the fourth quarter, as values were lower in 15 areas than they were in September.

Adam from Comerica said that the strong price gains last year made people feel better about the market. “For middle-income Americans, house prices are the most important factor in determining their wealth.” “Their leveling off and then rise in 2023 made Americans feel better about their personal finances and boosted consumer confidence,” he said.

He said: “Comerica forecasts for house prices to rise 2.3% in 2024 by the Case-Shiller index, rising a bit slower than average hourly earnings, as more newly-built housing supply comes to market and more homeowners who have been waiting to move or downsize start to take the plunge.”

(Source)