U.S. home prices increased slightly in December, rising just 0.1% compared with November and up 3.9% compared with December 2023, according to First American’s home price index report.
Nationally, home prices are now 54.8% higher compared to pre-pandemic levels (February 2020), according to First American’s data.
However, the rate of appreciation has slowed significantly during the past year
The decrease in home prices reported in last month’s HPI for October 2024 to November 2024 was revised down by 0.02 percentage points, from -0.01% to -0.03%.
“House price growth nationally started 2024 strong at a 7 percent annualized pace of growth but gradually slowed over the course of the year, ending in the high 3 percent year-over-year growth range,” says Mark Fleming, chief economist at First American, in the report. “Higher mortgage rates in the latter half of the year, combined with higher inventory levels, triggered the cooling trend.”
“If similar conditions persist through 2025, we should expect very moderate price appreciation,” Fleming says. “Areas with rapid supply growth that outstrips demand may face stronger moderation or even price declines, while areas with limited new supply may see steadier price growth or even price re-acceleration. The structural housing shortage nationally will keep a floor on how low prices can go, but a ‘higher-for-longer’ rate environment and inventory growth could cause further price moderation.”
A key factor moving forward is how much supply there is – and which markets see the most new home construction.
“House price growth has varied considerably at the regional level over the last year, largely driven by differences in for-sale inventories,” Fleming says. “As more homes become available, the power dynamics can shift in favor of buyers, putting downward pressure on prices. All else equal, house price growth in markets with higher inventory of homes available for sale will weaken compared to those with low inventory relative to demand.”
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