US Home Prices Soar to Record Highs in Latest Report

Home prices in the United States hit a new peak this summer, though the rate of increase slowed down in June.

The S&P CoreLogic Case-Shiller National Home Price Index, which tracks home values across the country, rose 0.2% from May to June after adjusting for seasonal factors. This marks the fifth month in a row that prices have gone up, reaching an all-time high.

Looking at the bigger picture, home prices nationwide were 5.4% higher in June compared to the same time last year. That’s a bit less than the 5.9% annual increase we saw in May.

In the 20 largest U.S. cities, prices went up 0.4% from May to June, which was more than experts predicted. These cities saw a 6.5% price jump compared to last June.

Brian Luke from S&P Dow Jones Indices pointed out: “Home prices and inflation continue to factor into the political agenda coming into the election season. While both housing and inflation have slowed, the gap between the two is larger than historical norms, with our National Index averaging 2.8% more than the Consumer Price Index.”

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Some cities are seeing bigger price jumps than others. New York led the pack with a 9% increase from last year. San Diego and Las Vegas weren’t far behind, with prices rising 8.7% and 8.5% respectively.

These price hikes happened before mortgage rates took a recent dip. Last week, rates fell to their lowest point since May 2023. This drop came as investors started thinking the Federal Reserve might cut interest rates soon.

But even with lower mortgage rates on the horizon, buying a home is still a challenge for many Americans. The National Association of Realtors (NAR) keeps track of how affordable homes are for typical families. Their index showed that in June, it was even harder for families to afford a median-priced home than it was a year ago.

To put this in real terms, the average mortgage payment in June was $2,303 – that’s $137 more than it was a year earlier. This increase is making it tough for many families to buy homes.

Molly Boesel, an economist at CoreLogic, thinks some potential buyers might be waiting to see what happens with interest rates. “All eyes are on the Federal Reserve and the anticipated rate cut in September, and likely homebuyers may wait until mortgage rates drop further before buying,” she said.

Some experts, like those at Morgan Stanley, believe that as mortgage rates come down, it’ll be easier for people to afford homes. This could lead to more home sales and possibly slow down how fast prices are going up.

James Egan, a housing expert at Morgan Stanley, explained: “As rates come down, for-sale inventory is increasing. When combined with improvements in affordability, this should catalyze increased sales volumes in the coming year.” He also thinks this could slow down how quickly home prices are rising.

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Lower mortgage rates could make homes more affordable, potentially leading to more sales and a cooldown in price growth. However, for now, many families are still finding it challenging to buy homes due to high prices and the overall cost of borrowing.