U.S. home prices increased 0.1% in January compared with December and were up 5.8% compared with January 2023, according to CoreLogic’s home price index.
However, CoreLogic projects that annual home price growth will slow to 2.6% by January 2025.
Rhode Island, New Jersey and Connecticut took the top three spots for annual home price gains for the fourth consecutive month.
Both higher mortgage rates and inventory shortages continued to exacerbate the nation’s long-running housing affordability problem, which particularly affects areas of the country where wages tend to be lower.
Despite affordability issues, many younger Americans are finding a path to homeownership, with millennials accounting for more than half of home purchase applications between 2020 and 2023.
Meanwhile, baby boomers who already have significant financial reserves can pay for homes entirely in cash, which further increases challenges for other buyers.
“U.S. annual home price growth strengthened to 5.8 percent in January,” says Selma Hepp, chief economist for CoreLogic, in a statement. “And while the acceleration continues to reflect the residual impact of strong appreciation in early 2023, the annual rate of growth is expected to taper off in coming months.”
“Home prices further increased in late 2023 despite high mortgage rates, which surged to the highest level since the beginning of the millennium,” Hepp adds. “But metro areas that have struggled with the impact of higher rates continue to see downward movement on home prices. Generally, pressures from higher mortgage rates tend to occur in markets where the higher cost of homeownership pushes against the affordability ceiling.”
Among the major U.S. cities, Miami posted the highest year-over-year home price increase in January, at 10.2%. San Diego saw the next-highest gain at 8.5%.
Among states, Rhode Island ranked first for annual appreciation at 13.2%) followed by New Jersey at 11.6% and Connecticut at 11%.
No states recorded year-over-year home price losses.