October 2023 Sees Strongest Annual Gain in Home Prices
Home prices rose 4.8% nationally in October compared with October 2022, according to the S&P CoreLogic Case-Shiller home price index. That’s a jump from the 4% annual increase in September and marks the strongest annual gain seen in 2023.
Rise in Composite Indices
The 10-city composite rose 5.7%, up from a 4.8% increase in the previous month. The 20-city composite rose 4.9%, up from a 3.9% increase in September.
Resilience Despite Rising Mortgage Rates
The strength in home prices came despite a sharp rise in mortgage interest rates in October. The average rate on the 30-year fixed loan crossed 8% on Oct. 19, according to Mortgage News Daily. That was the highest level in more than two decades. Rates, however, dropped steadily through November and more sharply in December, with the 30-year fixed rate now hovering around 6.7%.
“Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher,” said Brian Luke, head of commodities, real & digital assets at S&P DJI, in a release. “With mortgage rates easing and the Federal Reserve guiding toward a slightly more accommodative stance, homeowners may be poised to see more appreciation.”
Regional Variations
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 then New York with a 7.1% gain. Home prices in Portland, Oregon, fell 0.6%, the only city in the index showing lower prices in October versus a year ago.
Positive Outlook for Home Price Appreciation
“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, recovering all losses recorded in the second half of 2022,” said Selma Hepp, chief economist at CoreLogic. “Given the stronger seasonal gains seen in early 2023, annual home price appreciation should accelerate this winter before slowing again next year.”
Overall, October 2023 saw a significant increase in home prices, defying expectations due to rising mortgage rates. With rates now easing and a more accommodative stance from the Federal Reserve, homeowners can expect further appreciation in the coming months. Regional variations were observed, with Detroit leading in year-over-year gains. The positive outlook for home price appreciation suggests a potential acceleration this winter before a slowdown next year.
