Rosalind Evans
As the American economy grapples with the after-effects of a global pandemic, the housing market presents a paradox. Despite soaring mortgage rates, home prices continue to escalate, challenging economic forecasts and defying traditional market behaviour. The latest S&P Case-Shiller Index provides a stark illustration of this trend, revealing a national increase of 3.9% in home prices compared to last year. This rise accompanies mortgage rates climbing towards the 8% mark, a juxtaposition that Craig Lazzara of S&P DJI encapsulates: “Although this year’s increase in mortgage rates has surely suppressed the number of homes sold, the relative shortage of inventory for sale has been a solid support for prices.”
Detroit, San Diego, and New York City lead this surprising surge, outstripping other metropolitan markets with their robust annual increases. However, a trio of cities—Las Vegas, Phoenix, and Portland—buck the trend, displaying a year-on-year decline in home prices. This regional disparity underlines the complexity of the current housing landscape, shaped by a pandemic that has both boosted and buffeted markets in equal measure.
On the other hand, the rental market is experiencing a softening, with a drop in the national median rent and a record influx of new apartment availability. This easing is timely, as it coincides with a period when renters gain leverage in lease negotiations, as noted by Apartment List. The data suggest a potential moderation in rent growth, a shift Peter Boockvar of Bleakley Financial Group believes will reflect in the Consumer Price Index (CPI) data, signalling a temporary inflation relief. However, Boockvar cautions about a possible “reacceleration in the years after,” highlighting the transient nature of current market dynamics.
Buoyed by an inventory shortage, the housing market defies gravity, even as mortgage rates reach new heights. With the year-end approaching and the rent market showing signs of cooling, consumers find themselves at a crossroads. Despite economic headwinds, the resilience of home prices suggests a market not easily swayed by rate hikes or predictions. As Lazzara optimistically states, “the breadth and strength of this month’s report are consistent with an optimistic view of future results,” indicating a robust market that may continue its upward trajectory.
