Home prices hit new record high, but pace of growth moderates

Rising housing prices pushed a leading indicator to another record high this spring, as growth started 2024 at its hottest in two years.

While the rate of annual appreciation is showing signs of moderation, the S&P CoreLogic Case-Shiller Index rose another 5.9% in May to a new high, up for the 11th straight month. On a month-over-month basis, the index inched up 0.9% on a nonadjusted basis from April to May, slightly off the 1% average over the same time period from 2015 to 2019.

The latest yearly surge slowed from its recent growth rate of 6.5% recorded in both February and March. The index also decelerated from its annual increase of 6.3% in April and 1.2% monthly. 

"While annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging," said Brian D. Luke, head of commodities, real and digital assets at S&P Global, in a press release. 

"Our home price index has appreciated 4.1% year-to-date, the fastest start in two years."

Similarly, the Federal Housing Finance Agency saw home prices in May rise at a similar 5.7% annual rate, down from 6.3% in April. Running contrary to the Case-Shiller Index, though, FHFA's measure of monthly change from April was flat.  

Housing costs were up across the country compared to May 2023, higher by 2.4% in the West South Central census division and up as much as 9.2% in New England, according to the agency. Monthly changes were near flat across the country falling no more than 0.5% in some regions and gaining 0.3% at most. 

While acknowledging the strength of the 2023 gains, CoreLogic said recent moderating price growth also illustrates the impact of slowing housing demand, as costs put homeownership out of reach for some buyers and left inventory on the market.

"The housing market experienced considerable cooling at the end of the spring home-buying season as mortgage rates pushed beyond the 7% benchmark, which seems to be a mental barrier for potential homebuyers in deciding to enter the home-buying process," said CoreLogic Chief Economist Selma Hepp.

Since early June, mortgage interest rates have come in lower, but buyers have yet to respond in large numbers. Existing-home sales in June were at its lowest in over a decade for the comparable time period.  

The S&P Case-Shiller composite index of 20 large U.S. cities saw an even more rapid pace of annual acceleration at 6.8%. 

"All 20 markets observed annual gains for the last six months," Luke said. New York topped the list with a 9.4% rate of growth. It was followed by San Diego and Las Vegas at 9.1% and 8.6%, respectively. 

"The last time we saw that long a streak was when all markets rose for three years consecutively during the COVID housing boom." 

On the other end, some cities saw prices resetting from what CoreLogic referred to as "excessive gains" during the pandemic. 

The overall upward trend this year may spell mixed fortunes for hopeful buyers anticipating  more interest rate relief.  

"The waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward," Luke said.