Home prices are rising faster and faster each month, fueled by a decline in mortgage rates, per CNBC.
At the national level, home prices experienced a notable 5.2% surge in November compared to the same month the previous year, as reported by analytics firm CoreLogic. This reflects an increase from the 4.7% annual gain observed in October. Leading the growth were states in the Northeast, with Rhode Island (11.6%), Connecticut (10.6%), and New Jersey (10.5%) witnessing the most substantial year-over-year increases. Conversely, some areas saw price declines in November, with Idaho (-1.3%), Utah (-0.4%), and Washington, D.C. (-0.2%) experiencing contractions.
CoreLogic's chief economist, Selma Hepp, noted the remarkable strength in home prices, attributing it to pent-up demand despite the nationwide affordability challenges. Markets with prolonged inventory shortages, exacerbated by a scarcity of new homes for sale, recorded significant price gains throughout 2023.
The impact of mortgage rates on consumer buying power is a critical factor. Lower mortgage rates contribute to increased buying power. Although prices are anticipated to soften slightly in the coming year, this will depend largely on supply levels. Given the current low supply and rising demand due to lower mortgage rates, home prices are expected to maintain an upward trajectory.
On a city level, Detroit surpassed Miami with the largest annual price gain at 8.7%, compared to Miami's 8.3%, according to CoreLogic. Miami had held the top spot for 16 months. Detroit's strong appreciation is seen as a catch-up following a lag during the pandemic. Other Midwest areas are also experiencing robust appreciation due to their more affordable nature.
Despite Detroit having one of the nation's most affordable median home prices, the market is considered overvalued concerning local income levels. Approximately 82% of the 397 surveyed metropolitan housing markets are deemed overvalued, indicating that Detroit's home prices are relatively high compared to local household incomes. Notably, some large cities, including Boston, Chicago, Los Angeles, and Washington, D.C., are considered "normal" in valuation, reflecting a more balanced relationship between home prices and local incomes.
