U.S. home prices increased 0.3% in December compared with November and were up 7.2% compared with December 2022, according to First American’s home price index report.
However, the firm says annual home price growth likely peaked in December and that home price appreciation will slow in the months to come.
“The pace of annualized home price appreciation peaked in December, as buyers rushed to take advantage of falling mortgage rates,” says Mark Fleming, chief economist at First American, in the report. “In January, the preliminary estimate of annualized appreciation cooled modestly by half a percent and is likely to slow down further in the coming months.
“Despite concern that house prices could decline significantly at the beginning of 2023, rate-locked potential home sellers kept supply tight, maintaining pressure on prices,” Fleming says. “Optimism that mortgage rates will fall in 2024 may incent more homeowners to sell, boosting supply and, in turn, improving affordability for buyers. While more supply and improved affordability should cool post-pandemic hot house price appreciation, 2024 may still be the year that house price appreciation doesn’t get too cold, but closer to just right.”
First American’s data show that while the dip in mortgage rates that came in December pushed prices in many markets to new peaks, some markets remained well below their prior peaks.
States that saw the highest annual home price appreciation in December included Pennsylvania (8.4%), Florida (6.1%), Texas (5.3%), California (4.4%), and New York (4.4%).
Metro areas that saw the highest home price appreciation included Nassau County, N.Y. (10.7%), Anaheim, Calif. (10.2%), Warren, Mich. (9.6%), Miami (9.4%), and Pittsburgh (8.8%)
“While house prices increased in all 30 markets tracked by our index over the last year, this rising tide hides the change in market prices since their peak,” Fleming says. “Measuring the price change in each market from their post-pandemic peak reveals that house prices are below their prior peaks in 23 of the top 30 markets. Notably, house prices are currently 6 percent or more below their prior peak in six markets, with the largest price declines from peak in Oakland (-13.5%), Austin, Texas (-9.9%), and Seattle (-9.2%).”
Photo: Tierra Mallorca