Housing Market Continues to Heat Up: Home Prices Rise in the 20 Largest U.S. Metros

The U.S. housing market shows no signs of cooling down as home prices in the 20 largest metropolitan areas steadily increased for the sixth month. The S&P CoreLogic Case-Shiller 20-city house price index reported a 1% rise in August compared to the previous month. On a year-over-year basis, national home prices in these significant metro markets increased by 2.2%.

A broader perspective reveals that the national index, which includes a more extensive range of markets, recorded a 0.9% monthly increase in home prices for August and a 2.6% year-over-year rise, all numbers adjusted for seasonal variations.

Key highlights from the report include Chicago leading the year-over-year home price gains in August, with a remarkable 5% increase, marking the fourth consecutive month in which the city has outperformed the rankings. New York and Detroit followed closely with impressive gains of 4.98% and 4.8%, respectively.

However, the Western region of the United States continued to lag behind the rest. Las Vegas and Phoenix witnessed the most significant drops in home prices, at -4.9% and -3.9%, respectively.

Here is a snapshot of the year-over-year changes in home prices for some of the major cities:

  • Atlanta: 3.4%

  • Boston: 3.1%

  • Charlotte: 3%

  • Chicago: 5%

  • Cleveland: 3.9%

  • Dallas: -1.7%

  • Denver: -0.6%

  • Detroit: 4.8%

  • Las Vegas: -4.9%

  • Los Angeles: 3.2%

  • Miami: 3.3%

  • Minneapolis: 1.9%

  • New York: 5%

  • Phoenix: -3.9%

  • Portland: -1.5%

  • San Diego: 4.1%

  • San Francisco: -2.5%

  • Seattle: -1.5%

  • Tampa: 0%

  • Washington: 3.4%

  • Composite-20: 2.2%

A separate report from the Federal Housing Finance Agency (FHFA) also confirmed the upward trajectory of home prices, with an August increase of 0.6% compared to July. Over the past year, the FHFA index showed a substantial 5.6% surge, with the Middle Atlantic region leading in price growth.

The big picture: The persistent shortage of homes for sale in the U.S. housing market continues to drive home prices. Homeowners are reluctant to sell, while eager buyers are left competing for limited inventory. Until the supply catches up with demand, significant fluctuations in home prices are unlikely, barring any unforeseen major events.

What S&P said: Craig J. Lazzara, managing director at S&P DJI, noted, "On a year-to-date basis, the National Composite has risen 5.8%, which is well above the median full calendar year increase in more than 35 years of data." He emphasized that while rising mortgage rates have dampened housing demand, they seem to have suppressed supply even more. Lazzara remains optimistic about future results unless higher rates or other economic events lead to general weakness.

What experts are saying: Thomas Ryan, property economist at Capital Economics, explained that the continued surge in house prices in August is due to the minimal supply of existing homes, which outweighs the impact of high mortgage rates. He anticipates that monthly gains in house prices may soften in response to rising mortgage rates but does not expect further price declines due to the extreme lack of inventory in the existing homes market.

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