U.S. Home Prices Rose to Record in August
Case-Shiller index rises 2.6% from a year earlier, as shortage of homes for sale kept the market competitive
Home prices rose in August to a record high as a shortage of homes for sale kept the market competitive.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, rose 2.6% from a year earlier in August, compared with a 1.0% annual increase the prior month. The August level was the highest since the index began in 1987.
On a month-over-month basis, the index rose a seasonally adjusted 0.9% in August.
While prices have risen, the number of home sales has fallen. Rising mortgage rates help explain both trends. Higher rates have kept buyers on the sidelines, reducing demand to buy homes. But higher rates have also kept potential sellers from listing their homes, because they don’t want to trade in their current low mortgage rates for higher ones. The low inventory of homes on the market is pushing prices higher in many parts of the country, even while demand is subdued.
The median existing-home sale price rose 2.8% in September from a year earlier to $394,300, according to the National Association of Realtors. Homes sold in September received an average of 2.6 offers, and about one-fourth of properties sold above their list price, according to NAR.
The Case-Shiller index, which measures repeat-sales data, reports on a two-month delay and reflects a three-month moving average. Homes usually go under contract a month or two before they close, so the August data is based on purchase decisions made earlier this year.
Mortgage rates have recently risen to new two-decade highs.
The combination of high home prices and rising mortgage rates is making home purchasing unaffordable to many would-be buyers. A home buyer needed an income of nearly $115,000 to afford the median-priced U.S. home in August, assuming a 20% down payment, according to real-estate brokerage Redfin. That is up from about $99,000 a year earlier.
The lack of affordability is likely to keep home-purchase activity low in the coming months.
“The higher rates are going to make a bad situation worse, there’s no getting around it,” said Robert Frick, corporate economist at Navy Federal Credit Union. “We’re not expecting a revival this year or first quarter of next year.”
The Case-Shiller 10-city index rose 3.0% over the year ended in August, following a 1.0% increase in July. The 20-city index rose 2.2%, compared with a 0.2% increase in July.
Economists surveyed by The Wall Street Journal expected the 20-city index to increase 0.8%.
Chicago had the fastest annual home-price growth in the country, at 5%, followed by New York, at 4.98%. The weakest market was Las Vegas, where prices fell 4.9% on an annual basis.
A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found a 5.6% increase in home prices in August from a year earlier. The FHFA index rose 0.6% in August from the prior month on a seasonally adjusted basis.
Write to Nicole Friedman at [email protected]