House prices growing, stressing homebuyer affordability

Home prices continue to increase, albeit at a slower pace, but still stressing affordability at a time when mortgage rates have trended higher.

While recent data on existing and pending home sales has shown some consumers have jumped into the market even in the current rate environment, industry economists are seeing an improved but bumpy path for housing in 2025 because of the affordability issue.

The Federal Housing Finance Agency's seasonally adjusted House Price Index rose by 0.4% in October from September. That compared with a month-to-month increase of 0.7% in September and 0.3% for October 2023.

Year-over-year, the increase was 4.5% in October. September's annual increase was 4.4%, while for last October, prices rose 6.3% versus the same month in 2022.

"Annual house price gains have been trending down since February, stabilizing around 4.5% during the last three months," said Anju Vajja, deputy director for FHFA's Division of Research and Statistics, in a press release. "Even with elevated house prices and mortgage rates putting continued pressure on affordability, house prices continued to grow at a steady rate, likely due to a historically low inventory of homes for sale."

On an annual basis, every region of the country had price growth, with prices higher by 7% in the Mid-Atlantic states.

But compared with September, three regions had price declines: The South at 0.4% lower, while a decline of 0.1 took place in the Mountain and West North Central regions.

Values in the West South Central states were up by 1% over the prior month.

Separately, the S&P Corelogic Case-Shiller national HPI was up 0.3% month-to-month in October on a seasonally adjusted basis. Unadjusted, the index was 0.2 lower from September.

October's annual change was 3.6%, the seventh consecutive month where the rate of appreciation has slowed.

"Our National Index hit its 17th consecutive all-time high, and only two markets — Tampa and Cleveland — fell during the past month," said Brian Luke, S&P Dow Jones Indices head of Commodities, Real & Digital Assets, in the report. "The annual returns continue to post positive-inflation adjusted returns but are falling well short of the annualized gains experienced this decade."

This latest data is for the period prior to November's presidential election. "Removing the political uncertainly risk has led to an equity market rally; it will be telling should the similar sentiment occur among homeowners," Luke said.