High rates "will likely constrain additional price gains for the rest of the year"
US home price growth reaccelerated at a slightly higher rate in June, marking the fifth straight month of price gains.
The latest S&P CoreLogic Case-Shiller Indices revealed that house prices increased 0.9% month over month in June, with the 10-City and 20-City Composites also posting gains of 0.9%.
Compared to a year ago, home price growth remained stalled, averaging 0% in June (up from -0.4% in May). The 10-City Composite was down -0.5%, an improvement from the -1.1% decrease in the previous month. The 20-City Composite posted an annual loss of -1.2%, up from -1.7% in May.
"While home prices have remained strong in 2023, elevated mortgage rates complicate the situation for potential homebuyers, a trend that will likely constrain additional price gains for the rest of the year," said CoreLogic chief economist Selma Hepp.
Hepp added that home price acceleration is most notable in markets that stayed relatively affordable during the pandemic and saw less volatility from household migration, such as those in the Midwest and New England. The Midwest (+2.8%) continued as the nation's strongest region, followed by the Northeast (+1.6%), while the West (-5.9%) was the weakest region.
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"Home prices in these markets are now catching up with more expensive ones," she said.
The three best-performing cities were Chicago (+4.2%), Cleveland (+4.1%), and New York (+3.4%), with the highest annual gains in June. At the other end of the scale, San Francisco (-9.7%) and Seattle (-8.8%) remained at the bottom.
"As we've noted previously, the recovery in home prices is broadly based. Prices rose in all 20 cities in June, both before and after seasonal adjustment," Craig Lazzara, managing director at S&P DJI, said in the report. "Over the last 12 months, 10 cities show positive returns. Otherwise, half the cities in our sample now sit at all-time high prices.
"With 2023 half over, the National Composite has risen 4.7%, slightly above the median full calendar year increase in more than 35 years of data. We recognize that the market's gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month's report are consistent with an optimistic view of future results."
Hepp added that home prices "are still expected to reaccelerate and reach mid-single-digit growth rate by the end of the year, according to CoreLogic's latest HPI forecast."
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