Real estate prices hit record high in June according to S&P Case-Shiller index

Even as mortgage rates rose, home prices in the S&P CoreLogic Case-Shiller US National Home Price Index reached their highest levels ever.

In the three-month average ending in June, prices nationwide were 5.4% higher than in June 2023, according to data released Tuesday. Although the index hit a record high, the annual increase was less than May's reading of 5.9%.

The index for the 10 cities rose 7.4% year-on-year, up from 7.8% in the previous month. The index for the 20 cities rose 6.5% year-on-year, up from 6.9% in May.

“While both housing construction and inflation have slowed, the gap between the two is wider than has been typical in the past. Our national index is averaging 2.8% above the consumer price index,” noted Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, in a press release. “That's a full percentage point above the 50-year average. Before accounting for inflation, home prices have increased over 1,100% since 1974, but have more than doubled (111%) after accounting for inflation.”

New York had the highest annual increase of the 20 cities, with prices rising 9 percent in June, followed by San Diego and Las Vegas with annual increases of 8.7 percent and 8.5 percent, respectively. Portland, Oregon, saw just a 0.8 percent annual increase in June, the smallest increase of the top cities.

With housing affordability a major issue this election cycle, this month's report also broke down property values ​​by price range, breaking each city's market into three tiers. Looking only at major markets over the past five years, we find that in 75% of the markets covered, low-end price ranges are rising faster than the overall market.

“For example, the lower end of the Atlanta market grew 18% faster than the middle and upper end segments,” Luke wrote in the press release.

“New York's lower end has the largest five-year outperformance, outperforming the entire New York region by nearly 20%,” he continued. “New York also has the largest divergence between lower and upper end prices. Conversely, San Diego has seen the largest increase in value in upper end homes over the past five years.”

Prices across the San Diego market have increased 72% over the past five years, with the high end seeing a 79% increase versus a 63% increase in the low end.

The price increase came despite a sharp rise in mortgage rates from April to June, the average period for the index. Typically, when rates rise, prices fall.

The average 30-year fixed-rate mortgage rate was just under 7% at the start of April, then shot up to 7.5% by the end of the month, Mortgage News Daily reports. Rates stayed above 7% before falling back below that level in July. The 30-year fixed-rate mortgage rate is now around 6.5%.

“Mortgage rates have been falling since June, but there are signs that even the drop in rates is not enough to bring buyers back into the market,” said Lisa Sturtevant, chief economist at Bright MLS. “Some buyers are waiting for home prices – not just interest rates – to fall,”

While home prices are expected to decline month-on-month as we head into the fall, seasonal factors and increased inventory on the market mean they are unlikely to decline significantly and are still expected to be higher than last fall.