With over 27 years of data to rely on, the S&P Dow Jones Indices has released its latest S&P CoreLogic Case-Shiller Indices which found that in Jan. 2023 the trend of declining home price gains continued across the country as major cities—mainly along the West Coast—continued to see slowing home prices.
According to the index, home prices across the country only increased by 3.8% year-over-year; this number is down from 5.6% from Dec. 2022. The 10-city composite annual increase came in at 2.5%, down from 4.4% the previous month. The 20-city composite posted a 2.5% year-over-year gain, down from 4.6% in the previous month.
The East coast cities of Miami, Tampa and Atlanta again reported the highest year-over-year among the top 20 cities of the index with Miami leading the group with a 13.8% year-over-year increase, closely followed by Tampa at an 10.5%, and Atlanta at 8.4% increase.
On a monthly basis, the national index posted a 0.5% month-over-month decrease is January.
“2023 began as 2022 had ended, with U.S. home prices falling for the seventh consecutive month,” says Craig J. Lazzara, Managing Director at S&P DJI. “The National Composite declined by 0.5% in January, and now stands 5.1% below its peak in June 2022. On a trailing 12-month basis, the National Composite is only 3.8% ahead of its level in Jan. 2022, a result also reflected in our 10- and 20-city Composites (both +2.5% year-over-year).
“January’s market weakness was broadly based. Before seasonal adjustment, 19 cities registered a decline; the seasonally adjusted picture is a bit brighter, with only 15 cities declining. With or without seasonal adjustment, most cities’ January declines were less severe than their December counterparts.”
“Miami (+13.8% year-over-year) was the best performing city in January, extending its winning streak to six consecutive months. Tampa (+10.5%) and Atlanta (+8.4%) continued in second and third place, with Charlotte (+8.1%) not far behind. At the other end of the scale, one of the most interesting aspects of January’s report is the continued weakness in home prices on the West Coast, as San Diego and Portland joined San Francisco and Seattle in negative year-over-year territory. It’s therefore unsurprising that the Southeast (+10.2%) continues as the country’s strongest region, while the West (-1.5%) continues as the weakest.”
“Financial news this month has been dominated by ructions in the commercial banking industry, as some institutions’ risk management functions proved unequal to the rising level of interest rates. Despite this, the Federal Reserve remains focused on its inflation-reduction targets, which suggest that rates may remain elevated in the near-term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”
Realtor.com Economic Data Analyst Hannah Jones also commented on the index:
“Today’s S&P CoreLogic Case Shiller Index highlighted the struggles of buyers who were facing high prices, elevated mortgage rates, and persistent inflation. The index tracks price figures for the months of November, December and January. The last month of 2022 and first month of 2023 saw mortgage rates dip below November’s highs, providing a small boost in activity. Existing home sales continued to fall during this time, but by a smaller margin each month, as some buyers responded to lower mortgage rates by getting back into the market. However, less demand meant many would-be sellers chose not to enter the market, and many who chose to list had to settle for lower prices.”
“Nationally, the housing market cooled again in January with a 3.8% annual price increase in January, slower than December’s 5.6% gain. The 10- and 20-city composites both saw a 2.5% annual price increase in January, down from 4.4% and 4.6%, respectively, in December. Miami, Tampa and Atlanta again saw the largest price advances year-over-year of the cities in the 20-city index, but overall, all 20 cities saw price growth slow relative to the previous month.”
Mortgage rates remained below their recent peak during February and March, clearing the way for a sizable rebound in Existing Home Sales in February. Prices have continued to soften as sellers in the market adjust to the price-level necessary to stoke buyer demand. As we move into the spring buying season, mortgage rates have ticked lower, a welcomed sign of progress towards affordability.”
“At last week’s Fed meeting, Chair Powell noted that the recent instability in the banking sector is likely to lead to stricter lending requirements, which could trickle down to mortgage lending. The Fed raised the Federal Funds rate by 25 basis points, but acknowledged the potential end of the tightening cycle. Stricter credit requirements and a higher Federal Funds rate mean that it may be both harder and more expensive to borrow money, which both move the economy in the direction of slower growth and toward the 2% inflation target.”
“This combination of events impacts the housing market by keeping mortgage rates higher than last year, and by making it harder for buyers to secure a loan. More expensive, less available borrowing, especially with an unclear economic outlook, is likely to continue to limit buyer demand. Though home sales are expected to rebound in line with seasonal trends, this spring’s sales pace is expected to remain lower than last year, as uncertainty and high costs limit activity. Many sellers will feel the pressure to list their home for a lower price to ensure sufficient buyer attention and a quick sale.”
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