Annual Home Price Bump in October Highest of the Year
Mortgage rates have slid from 8.1% that month to 6.61% in December.
Recent peak mortgage rates of more than 8% in October didn’t deter home prices from having their highest year-over-year price percentage gain, according to the S&P CoreLogic Case-Shiller Home Price Index.
Home prices rose 4.8% nationally in October compared with October 2022, a jump from the 4% annual increase in September.
Among the top 20 cities, Detroit reported the largest year-over-year gain in home prices at 8.1% in October. San Diego followed with a 7.2% increase and New York was next with a 7.1% gain.
Portland, Ore., was the only market in the index’s 20-city list where prices fell, dipping 0.6% in October versus a year ago.
The 20-city composite rose 4.9%, up from a 3.9% advance in September and the 10-city composite rose 5.7%, up from a 4.8% increase in the previous month.
The 30-year fixed loan rate of 8.1% on Oct. 19 was the highest in two decades. Rates have slid steadily since, reaching 6.61% in December.
“Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher. With mortgage rates easing and the Federal Reserve guiding toward a slightly more accommodative stance, homeowners may be poised to see more appreciation,” Brian Luke, head of commodities, real & digital assets at S&P DJI, said in prepared remarks.
Selma Hepp, chief economist at CoreLogic, noted in prepared remarks that home price gains in the CoreLogic S&P Case-Shiller Index have increased by 7% since the beginning of the year and are 1% higher than at the peak in 2022.
This means they have “recovered all losses recorded in the second half of 2022,” Hepp said. “Given the stronger seasonal gains seen in early 2023, annual home price appreciation should accelerate this winter before slowing again next year.”
Ken Shinoda, a portfolio manager at DoubleLine Capital, wrote in a December note that 5% is the “magic number” for the 30-year fixed mortgage rate is “that would unfreeze the housing market” because it would bring together willing buyers and sellers.
Rates were in the 5% range in August 2022, and over the course of 2023, they went from the 6% range in the first few months of the year and peaked in October.
Bill McBride of the Calculated Risk blog said it’s more important to look at home prices in real terms, not in nominal terms.
As an example, McBride said, is that if a house price was $300,000 in January 2010, the price would be $424,000 today, adjusted for inflation, or a 41% increase.