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Home Prices Show Signs of Recovery

4.6

Charles M. Hall

August 28, 2023

Rise in Home Prices Expected to Continue

The upward trend in home prices is predicted to have continued in June, according to experts. Economists anticipate that the seasonally-adjusted 20-city index will show a 1% increase from May's level, matching the strong gain recorded the previous month.

Limited inventory of homes for sale has played a role in driving prices higher in recent months. Homeowners may be reluctant to move due to higher mortgage rates, which could result in them giving up a lower-cost loan for a more expensive one. Data from the Case-Shiller index reveals that in May, prices in seven out of the 20 cities reached new seasonally adjusted highs.

A more recent indicator of home prices, although less comprehensive, showed growth above year-ago levels in July for the first time since February. The National Association of Realtors reported that the median home price sold for $406,700 in July, representing a 2% increase compared to the same month last year.

It is important to note that both the Case-Shiller index and Realtors data cover a period before mortgage rates climbed above 7% in August, reaching their highest level in decades. This sudden increase, combined with already strong home prices, may potentially impact housing demand.

The future trajectory of home prices remains uncertain, as the rise in mortgage rates poses a threat to their recent strength. Craig J. Lazzara, Managing Director at S&P Dow Jones Indices, stated in July that the gains in price over the past four months could be affected by mortgage rate hikes or general economic weakness.