Home Prices Continue to Rise as Mortgage Rates Decline
According to a recent report from analytics firm CoreLogic, home prices in the United States are experiencing a rapid increase due to the decline in mortgage rates. In November, national home prices rose by 5.2% compared to the same month in the previous year, surpassing the 4.7% gain seen in October.
Regional Trends
The Northeastern states, including Rhode Island (11.6%), Connecticut (10.6%), and New Jersey (10.5%), saw the highest growth in home prices. Conversely, Idaho (-1.3%), Utah (-0.4%), and Washington, D.C. (-0.2%) experienced price declines. Selma Hepp, the chief economist for CoreLogic, attributes this continued strength in the housing market to pent-up demand and the prolonged inventory shortage.
Impact of Mortgage Rates
Lower mortgage rates have increased the buying power of consumers, leading to higher demand for homes. While there may be a slight softening of prices in the future, it largely depends on the supply of homes. Currently, with low supply levels and increased demand due to lower mortgage rates, home prices are expected to continue rising.
After reaching record lows during the Covid-19 pandemic, mortgage rates began to rise sharply in 2022. However, they have since fallen back and are now in the high 6% range for the average 30-year fixed loan.
Detroit Overtakes Miami in Price Gains
Detroit experienced the largest annual price gain at 8.7%, surpassing Miami, which had held the top spot for 16 months. According to CoreLogic, this increase in Detroit’s home prices is partly due to a catch-up after lagging behind during the pandemic. Additionally, other Midwestern areas are seeing stronger appreciation because they are more affordable.
Although the median price of a home in Detroit is still among the most affordable in the nation, it is considered overvalued due to local income levels. In fact, approximately 82% of the metropolitan housing markets surveyed by CoreLogic were considered overvalued. Notably, large cities such as Boston, Chicago, Los Angeles, and Washington, D.C. were considered “normal” in terms of valuation.
“It really depends on who is buying in the area, and we’ve seen more higher income folks buying in those areas,” said Selma Hepp.
