US Home Prices Surge to Record High in July Amid Inventory Shortage


In a persisting trend, US home prices have surged to a new record high in July, reflecting the sixth consecutive month of gains. This ascent, driven by historically low housing inventory, has led to an increase of 0.6% from the previous month, as reported in the seasonally adjusted data from the S&P CoreLogic Case-Shiller US National Home Price Index released on Tuesday.

In comparison to July 2022, the national composite index also exhibited growth, with prices rising by 1%. This noteworthy increase follows a seven-month period of declining home prices that persisted until January of this year, resulting in a cumulative 5% drop.

Craig Lazzara, Managing Director at S&P Dow Jones Indices, highlighted this progression, stating, "The increase in prices that began in January has now erased the earlier decline, so that July represents a new all-time high for the National Composite [index]."

Furthermore, Lazzara emphasized the broad-based nature of the recovery in home prices. As observed last month, 10 out of the 20 cities included in the sample have reached record levels. In July, prices experienced an upswing in all 20 cities after seasonal adjustment.

Cities that experienced the most significant price appreciation in July compared to the previous year were Chicago (up 4.4%), Cleveland (up 4.0%), and New York (up 3.8%). Notably, these same three cities also demonstrated the most robust appreciation in June.

On the contrary, cities in the West saw the largest year-over-year price drops in July. Las Vegas witnessed a 7.2% decrease in prices from a year ago, while Phoenix experienced a 6.6% decline.

The Midwest continues to exhibit the most substantial price strength, with a 3.2% increase in prices in July compared to the previous year, followed closely by the Northeast with a 2.3% rise. Conversely, the West and the South experienced annual price declines of 3.8% and 3.6%, respectively.

Since January, national home prices have seen a cumulative surge of 5.3%. However, the monthly increases have tapered off compared to earlier in the year. Selma Hepp, Chief Economist at CoreLogic, attributes this to the upward pressure on affordability brought about by higher mortgage rates. 

Freddie Mac reports that average rates for a 30-year, fixed-rate mortgage surpassed 7% in August, a level unseen in two decades. This rate has remained steady as the Federal Reserve continues its historic efforts to combat inflation.

Hepp anticipates that markets which saw a reset in home prices following the recent surge in mortgage rates, particularly those in the West, are likely to experience stronger gains over the next 12 months.