August’s seasonal home prices were down for the first time in August since 2022, particularly in the West
Despite much-needed optimism, brought about by a sharp decline in mortgage rates in August, the boost was short-lived and not enough to markedly renew homebuyer interest. As a result, home prices continued to weaken relative to their seasonal trend. and year-over- year gains took a step back. Still, the slight boost in homebuyer demand seen during the weeks of falling mortgage rate illustrate the pent-up demand that is sitting on the sidelines and waiting for lower interest rates.
The tale of two regions reflects significant affordability challenges in the West and South, where home price increases in recent years and high mortgage rates priced out many potential buyers. The Northeast and Midwest continue to benefit from relative affordability and less cumulative increase in prices over the last few years, but also more limited for-sale inventory. Regions in the South, including Florida, have been cooling more rapidly this year, as inventories of homes for sales jumped due to higher non-mortgage costs of homeownership, including insurance, condo reserves and taxes, which have impacted fixed-income households in particular.
August marked the fifth consecutive month of slowing annual appreciation (Figure 1). While home prices continued to hit new highs, the CoreLogic S&P Case-Shiller Index slowed to a 4.25% year-over-year gain after peaking at 6.5% in both February and March of this year. Further cooling is expected with the latest CoreLogic Home Price Index report forecast home price gains slowing to 2.3% by next August.
The non-seasonally adjusted, month-over-month index recorded a 0.13% decline in August, well below the 0.28% average August increase recorded between 2015 and 2019 (Figure 2) and is in clear contrast to the 0.4% monthly increases recorded in August 2023. This is the first August to post monthly decline since the summer of 2022, when mortgage rates initially surged.
The 10-city and 20-city composite indexes also posted their 14th straight month of annual increases in August, up by 6% and 5.2%, respectively. However, the increases seen in both composite indexes also slowed from the March peak of 8.3% and 7.5%, respectively. Compared with the 2006 peak, the 10-city composite index is now 56% 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 6% higher than its 2006 level, while the 20-city index is up by 10% compared with its 2006 high point. Nationally, home prices are 19% higher (adjusted for inflation) compared with 2006.
In August, 19 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 San Diego and Los Angeles. Chicago was the only metro where annual gains accelerated from the month before
New York, Las Vegas and Chicago led the 20-city index, with respective annual gains of 8.1%, 7.3% and 7.2%. Twelve metros saw annual price gains higher than the national 4.25% increase. Denver and Portland, Oregon remained the slowest-appreciating markets in the 20-city index.
While home prices fell by 0.13% nationally from July to August, 11 metros recorded weaker monthly gains. Only three metros report monthly increases in August, including Chicago, Las Vegas and Detroit. Home price declines during the month were led by San Francsico, down 1.1%. Denver, San Diego and Los Angeles followed with similar declines, down by 0.7%. Historically, home prices tend to increase during these summer months.
Figure 4 summarizes the current year’s monthly changes in August compared with averages recorded between 2015 and 2019. Over the course of 2024, areas in the Midwest continue to see strong appreciations while many others, such as San Francisco and Southern California, which started off relatively strong, cooled notably by August, as affordability remains considerably more limited in those markets.
The month-over-month comparison of appreciation by price tier and location also reveals relative changes in demand across the country. In August, home price changes revealed wide variation across metros and price tiers. High tier prices fell on average by 0.4% across metros, while low and middle tiers were down by 0.2%.
Only in Chicago did prices pick up across all three tiers. Boston, Las Vegas and Miami saw price gains in the middle-price segment. In Los Angeles, the low-price segment appreciated, while the high tier was the largest depreciating market. By contrast, San Francsico saw the largest declines across all price tiers. (Figure 5).
As we enter a slower time of the year for the housing market, big surprises are not expected. Home sales will likely take a slower beat, and price gains will ease for the remainder of the year.
However, it will be interesting to watch what happens in the early months of next year and in preparation for spring homebuying season. Home price gains during springtime over the last few years were stronger than the historical average. With volatility in mortgage rates, pressure of elevated non-fixed homeownership costs — such as insurance and taxes — and for-sale inventories building, the spring homebuying season may not see the heated competition that it did over the last few years. Nevertheless, the continued bifurcation across markets may mean very different trends emerge, and home prices follow diverging paths.
