US Home Prices Are Still Rising, But at a Slower Pace
Escalating Home Prices: A Slight Deceleration as They Continue to Climb, Exhibiting Some Moderation
The US real estate market is still on a hot streak, but the rate of home price growth has slowed a tad. According to the Case-Shiller U.S. National Home Price NSA Index, released on April 29, home prices increased by 3.9% annually in February. This figure represents a slight decrease from the 4.1% growth seen in January.
A Sluggish, Yet Resilient Market
Homes in major cities across the East, West, and Midwest saw significant price increases in February. New York City, which struggled during the pandemic, took the top spot with an impressive 7.7% yearly gain. Following Big Apple, the urban centers with the largest price increases were:
- Chicago (6.95%)
- Cleveland (6.58%)
- Boston (5.91%)
- Detroit (5.76%)
- Seattle (4.95%)
- Las Vegas (4.9%)
The only metropolitan area to see a decrease in home prices was Tampa, which has been experiencing a decline for several months.
In comparison to historical trends, Seattle has seen the most substantial appreciation over the past two decades, up by 175%. Strong performers in this time frame also include Dallas (152%) and Charlotte (145%). Nationally, home prices have appreciated by 102%, while cumulative inflation for the same period was 66%. On the other hand, Chicago, Las Vegas, and Minneapolis have lagged behind with appreciation of 41%, 45%, and 48% respectively.
The Fed and the Housing Market
In September 2024, the Federal Reserve made its first interest-rate cut in years, with two more cuts following before the end of the year. Despite this, its aggressive attempts to combat inflation in 2022 and 2023 contributed to 10 consecutive rate hikes and sent mortgage rates soaring. Although inflation has since declined, mortgage rates remain elevated, affecting the housing market. As of April 23, 2025, the average 30-year mortgage rate stands at 6.86%.
The persistent rise in mortgage rates has acted as a "golden handcuff," limiting the desire and ability of homeowners to move, adding pressure to existing housing inventory. While the market may eventually adjust and mortgage rates may drop slightly, the interest rates remain high as of now.
Implications for Homebuyers and Sellers
Affordability remains a hurdle, particularly for first-time buyers, and price growth may reach its peak. According to Skylar Olsen, chief economist at Zillow, "Home prices are increasingly untenable to potential homebuyers, waning consumer confidence, heightened insecurity over economic uncertainties and the future of household budgets are impacting the consumer housing market."
Despite these conditions, massive price drops for buyers are not expected anytime soon. According to Mark Hamrick, our senior economic analyst, "those who are highly motivated to purchase a home should be prepared for the sticker shock associated with the increased expense of financing the purchase. Part of the flexibility that may be required includes seeking a possible downgrade of footprint or quality of home, along with the neighborhood, in order to achieve an affordable purchase."
- Corelogic's analysis revealed that the average 30-year mortgage rate as of April 23, 2025, is 6.86%, echoing the impact of the Federal Reserve's rate hikes on financing in the housing-market.
- In the wake of these higher mortgage rates, homeowners may find themselves temporarily hesitant to move, contributing to pressures on the existing housing-indices.
- Amidst the persistent high mortgage rates, investors should remain cautious about the potential impact on the housing-market, given the already slowing growth in home price indices.
- Despite a potential recession or economic uncertainties, homeowners and first-time buyers alike may find the affordable housing-market challenging, as home price growth continues to outpace core inflation rates.
- Some US cities, like Chicago, Las Vegas, and Minneapolis, have not seen as much appreciation in the housing-market over the past two decades compared to cities like Seattle or Dallas, suggesting a divergence in growth patterns across the real-estate market and indices.
