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The persistent shortage of homes on the market is sending house prices climbing despite the highest mortgage rates in decades.
The S&P CoreLogic Case-Shiller 20-city price index rose 0.2 percent in December, the 11th straight month of rising home prices. Compared with a year earlier, home prices were up 6.1 percent.
Most homeowners with mortgages are paying far lower interest rates than currently available from lenders. As a result, they are reluctant to sell their home and take out a loan on a new home at a higher rate. This has been a drag on home sales but has boosted home prices and residential construction.
The 20-city index is the most closely followed index of home prices in the U.S. It tracks repeat sales of homes so it is not distorted by the mix of homes sold in any given month. It includes sales not just in city centers but in the metro areas around the 20 largest U.S. cities.
The Case-Shiller indexes are three-month averages, so the December figures include November and October. Since home sales close 45 to 60 days after the transaction is signed, these figures include deals signed as long ago as August 2023.
The broader measure of home prices, the national index, also rose 0.2 percent and is up 5.5 percent over the past year. The 10-city index, which is concentrated on the very biggest metro areas, was also up 0.2 percent for the month and is up seven percent over the past 12 months.
All three indexes are at all-time highs.
Home prices climbed every month in 2023 with the exception of January, when they declined. This was the smallest monthly increase since that decline.
Housing is typically considered one of the parts of the economy most sensitive to interest rate changes. But since so many homeowners locked in low and fixed rates during the pandemic and earlier, the Federal Reserve’s interest rate hikes have been much less impactful than many economists expected. It is unusual for home prices to be climbing so consistently and rapidly while interest rates have been climbing.
The December figures were in line with what Wall Street analysts expected.
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