Rising rates throw cold water on home price growth

Home prices continue to rise, though at a slackening pace, due to increasing mortgage rates that have dampened buying demand.

Data on existing and pending home sales shows that some national and regional areas of the country are starting to see downward shifts in price growth, but likely not enough to make home buying more affordable. 

The Federal Housing Finance Agency's seasonally adjusted House Price Index rose by 0.3% in November from October. The month prior, the index grew by 0.4%. On an annual basis, home prices grew by 4.2% in November. October's annual increase came in at 4.5%, while September was 4.4%.

"Annual house price gains continued to moderate in November, with all nine Census divisions showing slower pace of growth than a year ago." said Dr. Anju Vajja, Deputy Director for FHFA's Division of Research and Statistics. "The slowdown in price growth is likely due to higher mortgage rates contributing to cooling demand."

Year-over-year, every region of the country had price growth, with prices higher by 7.7% in the New England states. However, compared with October, the East South central division saw monthly home prices drop by 0.6%, per the report. Values in the West North Central and New England divisions were up 0.9% from the month prior.

Concurrently, the S&P Corelogic Case-Shiller national home price index was up 0.4% month-to-month in November. November's annual change was 3.8%, an increase from a 3.6% annual gain in October.

"With the exception of pockets of above-trend performance, national home prices are trending below historical averages," said Brian Luke, S&P Dow Jones Indices head of Commodities, Real & Digital Assets, in the report.

"Markets in New York, Washington, D.C., and Chicago are well above norms, with New York leading the way," added Luke. "However, markets out west and in once red-hot Florida are trending well below average growth."

Looking ahead, economists predict that 2025 homebuying trends will be akin to those of the year prior.

"Early housing market indicators suggest that 2025 spring home buying season may look very similar to 2024 – more inventory but also challenging affordability suggesting that home price appreciation will continue to slow, averaging about 2.4% for the year," said Dr. Selma Hepp, chief economist at CoreLogic in a statement.