Housing Market: Home Prices Hit Record Highs in July — Here’s the Main Factor Driving Them Higher (Despite High Mortgage Rates)
Written by
Yaël Bizouati-Kennedy
Edited by
Nicholas Morine
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Despite soaring mortgage rates, home prices not only continued to rise, but hit record highs in July as demand outpaced supply.
In July, the S&P CoreLogic Case-Shiller National Home Price Index increased 1% from a year ago, after holding steady in June and declining in April and May, according to a Sept. 26 CoreLogic statement.
“While the supply of houses for sale is generally increasing, it continues to remain well below the levels needed to meet the demand for homebuyers,” said Selma Hepp, chief economist at CoreLogic.
Hepp added that this imbalance of supply and demand in the housing inventory is helping to keep home prices strong, with little chance of abating, in CoreLogic’s near-term outlook.
“Even with interest rates expected to stay above 6% into next year, homebuyers in many markets are still paying at least 90% of the original asking price, with some needing to bid up in order to purchase their dream home,” added Hepp.
Homebuyers Staying Put
The index showed that buyer demand continues to outmatch housing supply, creating upward pressure on home prices despite the fact that home purchase costs are taking up an outsized share of household incomes, said Realtor.com chief economist Danielle Hale.
Hale indicated that existing home sales, limited by low inventory as high costs cause many existing homeowners to stay put, have borne the brunt of the impact — and continued to slip in July.
“In the meantime, households who need to move now and are ready to buy can find some solace in the fact that relatively predictable seasonal trends point to the week of Oct. 1-7 as the best time to buy this year,” said Hale. “During this week, home shoppers can expect to find more homes for sale and lower buyer demand than the typical week alongside prices that are below the year’s peak price.”
Regional Discrepancies in Home Prices Abound
There are, however, notable regional discrepancies in terms of price increases. Chicago, Cleveland and New York led the way for the third consecutive month, reporting the highest year-over-year gains among the 20 cities in July, according to the index.
Chicago remained in the top spot with a 4.4% year-over-year price increase, with Cleveland in at No. 2 with a 4% increase. New York held down the third spot with a 3.8% increase.
On the other hand, the largest year-over-year declines were Las Vegas, down 7.2%; Phoenix, down 6.6%; San Francisco, down 6.2%; Seattle, down 5.5%; and Dallas, down 3.4%.
“Tight inventories of existing homes have house prices rising despite high mortgage rates and stretched affordability,” said Bill Adams, chief economist for Comerica Bank. “The major national house price indexes are all positive again in year-over-year terms, though some regions continue to see lower prices than a year ago.”
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