September’s seasonal home prices fall again, driven by cooling California markets
Home prices continued to cool in September as homebuyers struggled with inflation fatigue. Inflation has affected both goods and other services as well as housing prices, which are now 51% higher than at the start of the pandemic.
When higher prices are coupled with persistently elevated mortgage rates and adjusted for inflation, a typical mortgage payment, only including principal and interest, is now 82% higher than pre-pandemic. That doesn’t include rising costs of property taxes and insurance.
As a result, it’s not hard to see why the housing market is in the doldrums.
In September, home prices weakened more notably in western markets and larger metro areas, which have grown increasingly more unaffordable in recent years. In contrast, affordable markets in the Midwest and Desert West continue to squeeze out home price gains.
September marked the sixth consecutive month of slowing annual appreciation (Figure 1). While home prices are still hitting new highs month after month, the CoreLogic S&P Case-Shiller Index slowed to a 3.9% year-over-year gain after peaking at 6.5% in both February and March of this year. Additional cooling is expected though the middle of next year before home price growth picks up again.
The latest CoreLogic Home Price Index report forecasts home price gains slowing to 2.3% by next August.
The non-seasonally adjusted, month-over-month index recorded a 0.1% decline in September, well below the average 0.12% September increase recorded between 2015 and 2019 (Figure 2) and is in clear contrast to the 0.3% monthly increases recorded in September 2023.
Home prices slowed notably this summer and fall compared with last year as the jump in mortgage rates started weighing more heavily on housing demand. This is the first September to post a monthly decline since the summer of 2022 when mortgage rates experienced their initial surge. Nevertheless, the rate of monthly declines appears to be flatting out at 0.1%.
The 10-city and 20-city composite indexes also posted their 15th straight month of new peaks in September, with annual growth cooling to 5.2% and 4.6% from the March peak of 8.3% and 7.5%, respectively.
Compared with the 2006 peak, the 10-city composite index is now 55% higher, while the 20-city composite is up by 62%. Adjusted for inflation, which is showing signs of easing, the 10-city index is now 5% higher than its 2006 level, while the 20-city index is up by 10% compared with its 2006 high point. When adjusted for inflation, national home prices are 19% higher compared with 2006. Inflation-adjusted prices haven’t shown the same level of appreciation as nominal prices given elevated inflation in recent years. Recent CoreLogic analysis of U.S. metros also showed the unequal impacts of inflation geographically.
In September, 17 of the 20 metros saw slowing price growth year over year compared with the previous month (Figure 3). Miami posted the largest cooldown in annual gains compared with the month before, followed by Los Angeles and Boston. In Minneapolis, Cleveland, and Portland, Oregon, annual gains accelerated from the month before, with Minneapolis leading the pack.
New York, Cleveland, and Chicago led the 20-city index annual gains, with respective increases of 7.5%, 7.1%, and 6.9%. Eleven metros saw annual price gains higher than the national 3.9% increase. Tampa, Denver, and Portland, Oregon remained the slowest-appreciating markets in the 20-city index, though none recorded declines.
Historically, home prices tend to increase in the early fall. However, it’s worth noting that changes to real estate agent fees took effect in August which could be having some impact on the comparatively larger declines in markets where median home prices are higher.
Although home prices fell by 0.1% nationally from August to September, there were 13 metros that recorded weak monthly gains. Cleveland and Phoenix recorded the largest monthly increases. Also, Cleveland, Detroit, Washington D.C., and Chicago saw stronger price gains than their pre-pandemic averages in September.
In contrast, month-over-month home price declines were led by the three markets in California: Los Angeles, San Diego and San Francisco, all of which recorded a 0.9% drop in September.
Figure 4 summarizes the current year’s monthly changes in September compared with averages recorded between 2015 and 2019. Over the course of 2024, areas in the Midwest continued to see strong appreciation while those in California, which started off relatively strong, had cooled notably by September.
Affordability remains considerably more limited in California markets despite these markets seeing a notable increase in for-sale inventories. Interestingly though, while there has been an increase in the share of California homes selling for less than the asking price, the median price reduction remained steady over the course of the year, hovering at about 4.7%.
The month-over-month comparison of appreciation by price tier and location also reveals relative changes in demand across the country. In September, home prices were mostly down across metros and price tiers. The exception was Phoenix where home prices generally stayed positive.
In Atlanta, Chicago, Las Vegas, Washington D.C., and Miami, low-price tiers showed upticks. Meanwhile, high-tier prices fell 0.4% on average across metros, while the middle tier was down by an average of 0.5%. The low tier had the smallest average decline at -0.1%. Again, markets in California saw the largest declines across all price tiers, followed by Boston and Denver. (Figure 5).
As we continue through this slower time of the year for the housing market, things are likely to remain quiet. Home sales will be slow, particularly given the jump in mortgage rates in September. As a result, price gains will remain weak and potentially continue to post small monthly declines.
However, there is a lot of potential change on the horizon for the 2025 spring homebuying season, particularly in light of the changing presidential administration.
While spring home price gains were stronger than the historical average over the last few years, in part helped by lower mortgage rates and the lack of for-sale inventory, the current market’s elevated mortgage rates are likely to subdue home price appreciation going forward.
On the other hand, for-sale inventories are expected to be higher next year as the lock-in effect starts thawing out. Plus, the pressure of elevated non-fixed homeownership costs — such as insurance and taxes — will continue to weigh down some markets that have already weakened considerably in 2024. Taken together, the coming spring homebuying season may not see the heated competition that it did over the last few years. Additionally, the continued market bifurcation may mean very different trends emerge across the U.S. and cause home prices to follow divergent paths.
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CoreLogic’s Office of the Chief Economist
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