Rising mortgage interest rates did not deter homebuyers as home prices reached the highest level ever on the S&P CoreLogic Case-Shiller U.S. National Home Price Index. According to a recent study by CreditNews Research, the slowest-selling metro areas in the U.S. were identified.
The index’s 10-city composite saw a 7.4% annual increase, slightly down from the previous month’s 7.8%. Similarly, the 20-city composite experienced a 6.5% year-over-year rise, compared to a 6.9% increase in May. Despite these smaller gains, both composites reached record highs.
New York topped the list with the highest annual gain among the 20 cities, with prices climbing 9% in June. San Diego and Las Vegas followed closely with annual increases of 8.7% and 8.5% respectively. On the other end, Portland, Oregon had the smallest gain of just 0.8%.
In addition to these figures, the study also analyzed home values by price tier, dividing each city’s market into three tiers. Over the past five years, 75% of the markets covered showed low-price tiers rising faster than the overall market. For example, in the Atlanta market, the lower tier of homes rose 18% faster than the middle- and higher-tiered homes. New York’s low tier had the largest five-year outperformance, rising nearly 20% above the overall New York region. Conversely, San Diego experienced the largest appreciation in higher-tier homes over the past five years.
Interestingly, these price increases occurred despite a sharp rise in mortgage rates from April to June. Typically, when rates rise, prices cool. However, this was not the case this time. The average rate on the 30-year fixed mortgage started April just below 7% and rose to 7.5% by the end of the month. Rates remained above 7% before falling back under that level in July. Currently, the 30-year fixed rate is around 6.5%.
Lisa Sturtevant, chief economist at Bright MLS, noted that even with the decline in mortgage rates, there is evidence that buyers are still hesitant to enter the market. Some buyers are waiting for home prices, not just interest rates, to come down.
Going into the fall, home prices are expected to ease due to seasonal factors and increased inventory. However, significant drops in prices are unlikely, and prices are expected to remain higher than they were last fall.
In conclusion, despite rising mortgage interest rates, home prices in the U.S. reached record highs. Certain cities, such as New York, San Diego, and Las Vegas, experienced the highest annual gains. The study also revealed that low-price tiers in most markets outperformed the overall market, indicating a focus on affordability. While mortgage rates have fallen since June, potential buyers are still waiting for a decrease in home prices before entering the market. Although prices may ease slightly in the coming months, significant drops are not expected, and prices are projected to remain higher compared to last year.
