Home Prices Continued to Rise in Late 2023

In late 2023, the U.S. housing market showed resilience and strength as home prices continued their upward trajectory. The S&P CoreLogic Case-Shiller U.S. National Home Price Index revealed a 5.5% annual gain in December, marking an increase from the 5.1% gain recorded in November. Notably, all 20 markets tracked by the index reported yearly gains, with four markets experiencing increases of over 8%, showcasing the broad-based nature of the market’s strength.

Despite facing significant challenges, such as rising mortgage rates, the housing market remained robust. Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, highlighted that the S&P Case-Shiller Home Price Indices achieved seven consecutive record highs in 2023, underscoring the market’s resilience. He noted that while there were headwinds, including rising borrowing costs, the market continued to perform well, with 10 of the 20 markets surpassing previous records. San Diego led the way with an impressive 8.8% increase in home prices, followed closely by Los Angeles and Detroit, both posting gains of 8.3%.

On a regional level, the Midwest and Northeast stood out for their strong home-price performances. These regions experienced substantial price growth over the past year, driven by buyers seeking affordability near thriving economic hubs. However, the robust demand in these markets also strained inventory, leading to higher home prices and rents.

Looking ahead, the housing market faces continued challenges, particularly from elevated mortgage rates and a shortage of existing homes for sale. Selma Hepp, chief economist at CoreLogic, noted that as mortgage rates hover around 7%, convincing existing homeowners to sell may be challenging. However, there is pent-up demand, as evidenced by the recent surge in mortgage applications following a decline in rates. Buyers are eagerly waiting to enter the market, suggesting that 2024 may see another year of record-high home prices.