Upward Trajectory: US Home Prices in the 4th Quarter
Steady Growth Despite Signs of Softening
In the final quarter of 2023, US home prices maintained their upward trajectory, albeit with slower growth compared to previous quarters. The Federal Housing Finance Agency (FHFA) reported a 6.5% year-over-year increase in home prices, marking a 1.5% uptick from the third quarter. Additionally, prices edged up by 0.1% on a seasonally-adjusted basis in December compared to November.
Dr. Anju Vajja, acting deputy director for FHFA’s Division of Research and Statistics, noted that while house prices experienced modest growth throughout 2023, signs of market softening emerged, particularly evident in the lower house price appreciation in the fourth quarter.
State-Level Trends: Rhode Island Leads the Way
Home prices surged across nearly the entire United States, with values rising in 49 states over the past year. Rhode Island emerged as the frontrunner with a remarkable 15.1% price gain, followed closely by Vermont at 13.3%. Other states witnessing substantial increases include West Virginia (12.4%), Connecticut (12.2%), and New Jersey (11.4%).
However, Hawaii and the District of Columbia experienced a downturn, with home prices declining by 3.4% and 1.2%, respectively. This divergence underscores the localized nature of housing market dynamics amid broader national trends.
Factors Influencing the Market
The housing market continues to grapple with persistent inventory shortages across many regions. High mortgage rates further exacerbate this challenge, dissuading homeowners from listing their properties for sale as they capitalize on historically low rates secured during the pandemic’s peak. With the 30-year fixed mortgage rate surpassing 7% in recent weeks and Federal Reserve rate cut timelines extending, market dynamics are evolving rapidly.
Regional Variances in Price Changes
Across all nine census divisions monitored by the FHFA, positive year-over-year house price changes were reported. New England led the pack with a notable 10.3% annual increase in the fourth quarter. Conversely, the West South Central division exhibited the smallest rise at 3.2%, highlighting regional disparities in housing market performance.
Despite challenges and signs of softening, the overall resilience of the US housing market underscores its enduring appeal and robustness in the face of evolving economic conditions.
