Once again, the S&P Dow Jones Indices (S&P DJI) S&P CoreLogic Case-Shiller Index for April 2023 showed that among the top-20 major metropolitan areas showed that all reported month-over-month price increases with gains accelerating in 12 markets.
On a year-over-year basis the Case-Shiller Index, which is regarded as the leading indicator of U.S. home prices, reported a 0.3% annual decrease in April, down from a gain of 0.7% in March 2023.
Miami, Chicago, and Atlanta reported the highest year-over-year gains among the 20 cities in April. Miami held the top spot again with a 5.2% year-over-year price increase, while Chicago broke into the top three in second with a 4.1% increase, and Atlanta reclaiming third over Charlotte with a 3.5% increase. There are 17 of 20 cities reporting lower prices in the year ending April 2023 versus the year ending March 2023, with Boston, San Francisco, and Cleveland showing slight increases of 0.1%, 0.1%, and 0.9%, respectively.
On a monthly basis before seasonal adjustment, the U.S. National Index posted a 1.5% month-over-month increase in April, while the 10-city and 20-city composites both posted increases of 1.7%. After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.5%, while the 10-city composite gained 1.0% and 20-city composites posted an increase of 0.9%.
"The U.S. housing market continued to strengthen in April 2023," says Craig J. Lazzara, Managing Director at S&P DJI. "Home prices peaked in June 2022, declined until January 2023, and then began to recover. The National Composite rose by 1.3% in April (repeating March's performance), and now stands only 2.4% below its June 2022 peak. Our 10- and 20-CityComposites both gained 1.7% in April.”
"The ongoing recovery in home prices is broadly based. Before seasonal adjustments, prices rose in all 20 cities in April (as they had also done in March),” he continued. “Seasonally adjusted data showed rising prices in 19 cities in April (versus 14 in March).”
"On a trailing 12-month basis, the National Composite is 0.2% below its April 2022 level, with the 10-and 20-City Composites also negative on a year-over-year basis, but regional differences continue to be striking. Miami’s 5.2% gain made it the best-performing city for the ninth consecutive month, but in April, Chicago toddled into second place with a 4.1% gain,” Lazzara continued. “Atlanta (+3.5%) and Charlotte (+3.4%) round out the top four. The next three positions are occupied by New York, Cleveland, and then perennial medalist Tampa, indicating a remarkable diversity among the top performers. At the other end of the scale, however, the worst eight performers are all in the Mountain or Pacific time zones, with Seattle (-12.4%) and San Francisco (-11.1%) at the bottom. The Southeast (+3.6%) continues as the country's strongest region, while the West (-6.9%) remains the weakest.”
"If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April's data would bolster my argument,” Lazzara concluded. “Whether we see further support for that view in coming months will depend on the how well the market navigates the challenges posed by current mortgage rates and the continuing possibility of economic weakness."
“In April, the CoreLogic S&P Case-Shiller Index fell 0.2%year-over-year, first time since April of 2012, reflecting price declines that occurred throughout 2022. However, from the month before, home prices showed another strong gain, up another 1.3% which suggests that home buying conditions and home prices are heating up in many markets again. In addition, price gains among high tier homes are once again showing a strong rebound. Also, some markets that were weak during the pandemic are now showing strong price gains across price tiers, particularly Boston,” explained CoreLogic Chief Economist Selma Hepp.
“Accumulation of homeowner equity, which averages over $270,000 nationally and over $1 million in some high-cost areas, acts to supports home price appreciation particularly in in-migrating markets where baby bomber homeowners may be retiring to and given that about 50% of baby boomers owning their homes free and clear,” continued Hepp.
“Home prices may have bottomed out in April with a summer rebound on the way in this surprisingly resilient housing market,” Sturtevant began. “The S&P CoreLogic Case-Shiller Home Price Index fell by 0.2% between April 2022 and April 2023, the first year-over-year decline since 2012. Elevated mortgage rates and affordability challenges have put downward pressure on home prices, especially in high-cost markets in the West.”
“This could be the turning point for home prices, however,” she continued. “More recent data from Bright MLS shows the median price in the Mid-Atlantic rose by 0.3% year-over-year, with the strongest price growth in the region’s smaller metros. List prices were up in the Mid-Atlantic last week, and buyers are typically paying over the seller’s asking price.”
“Rising mortgage rates were supposed to quell home buyer demand and push home prices down. As rates escalated last year, buyer activity did stall. However, higher mortgage rates have not dampened buyer interest as much as many thought (or hoped) they would. As a result, while the Case-Shiller index showed a decline in April, the big home price drops some had predicted have not materialized.
The key reason home prices in most markets are stable or rising is that there are a lot of buyers competing over a very low supply of homes available for sale. Inventory is going to remain low for years, as existing homeowners are ‘locked in’ to extremely low mortgage rates and people are remaining in their homes longer,” Sturtevant continued. “But there could be some additions to the inventory in the second half of the year. New home building has been ramping up, accounting for a growing share of the housing inventory in recent months. Some homeowners who are living in homes that are not right for them will be enticed to list their home for sale later this year as they come to terms with mortgage rates above 6% as the new normal.”
That new listing activity will unfortunately not open up supply significantly,” Sturtevant concluded. “As a result, we will likely see home prices stable or growing slightly through the rest of the year with more buyers than sellers in the market.”