US Home Prices Continue to Rise despite Higher Mortgage Rates
Housing Market Continues to Flourish
According to the S&P CoreLogic Case-Shiller Index, home prices in the United States were 3.9% higher in September 2023 compared to the same month a year earlier. This is up from a 2.5% annual gain in August, despite the fact that the average rate on the 30-year fixed mortgage was on the rise, reaching almost 8%. The report highlights the continued strength in the housing market, with Detroit, San Diego, and New York experiencing the biggest annual increases at 6.7%, 6.5%, and 6.3% respectively.
The managing director at S&P DJI, Craig Lazzara, commented on the market’s strength, despite the increase in mortgage rates affecting the quantity of homes sold. However, the relative shortage of inventory for sale remains a solid support for rising prices.
Mortgage Demand and Price Increases
Although mortgage rates have eased in recent weeks, mortgage demand is still at its highest level in 5 weeks, following the fall in interest rates. Year to date, home prices have risen 6.1%, surpassing the median full calendar year increase in more than 35 years of this index’s data. This is seen as a positive sign for the housing market, provided there are no major economic downturns in the near future.
What About Rents?
As home prices continue to rise, rents are showing signs of easing up. The national median rent dropped 0.9% in November from October, and has fallen 3.5% from its all-time high in August 2022. However, rent is almost $250 a month more than it was three years ago.
Reasons for the Decrease in Rents
The decrease in rents is attributed to seasonal and supply factors. A record amount of new apartment supply has come onto the market this year after a surge in construction in the sector. As vacancies become harder to fill closer to the holidays, renters have more negotiating power in lease agreements.
What the Future Holds for Renters
Rent growth is expected to be moderated by more supply next year. Nationwide, the apartment vacancy rate is now 6.4%, slightly higher than the pre-pandemic average. However, it could rise even more next year. As rental growth is expected to pick up again in the spring seasonally, the slowdown will be appreciated, particularly when mortgage rates are above 7% and affordability to buy a home is challenging.
In conclusion, the US housing market continues to show strength, with home prices rising despite higher mortgage rates. On the other hand, the rental market is experiencing a decrease in rents due to increased supply, providing renters with more negotiating power. Despite these changes, the overall outlook for the housing market remains optimistic.
I have been featured in numerous publications, both online and offline, and am a regular speaker at industry events. I am also the founder of Crypto University, an online educational platform that helps people learn about cryptocurrencies and blockchain technology. In addition to my writing and teaching career, I am also an active investor in the cryptocurrency space. I have made investments in some of the leading projects in the space, and my portfolio has outperformed the market by a wide margin