A toy house on a table of chalk-drawn dollar signs.

Home price growth bucked historical norms in 2023 

Despite market challenges, the Case-Shiller Index was up 5.5% annually in December, exceeding national averages over the past three decades.

February 27, 2024
3 minutes

Key points:

  • While there was consistent growth last year, home price gains slowed between the third and fourth quarters.
  • Price gains are expected to continue in 2024, but they will likely be smaller and influenced by the Federal Reserve’s actions on interest rates.
  • All cities in the index showed annual gains, led by San Diego — but most experienced monthly declines between November and December.

The housing market may have cooled down last year, but that didn't stop home price growth from continuing to exceed historical norms.

The CoreLogic S&P Case-Shiller U.S. National Home Price Index rose 5.5% year-over-year in December. By comparison, annual growth over the past 35 years has averaged 4.7% nationally, said Brian Luke, head of commodities at S&P Dow Jones Indices. All 20 markets in the composite index reported yearly gains for the first time, showing "a rising tide lifts all boats" trend, Luke noted.

"The past two years reflect consistent growth slightly above trend, suggesting a more secular shift in home ownership post pandemic," Luke said, noting that the early pandemic years featured double-digit jumps in home prices.

A separate report from the Federal Housing Finance Agency indicated a similar trend. The FHFA, which looks at loan purchasing data from Fannie Mae and Freddie Mac, reported a 6.5% rise in home prices between the end of 2022 and 2023.

Price growth, sales could be slowing

Both reports noted a softening of home prices between the third and fourth quarters, however. And with 30-year mortgage interest rates near the 7% mark slowing demand, it's hard to predict how prices will be affected as the year progresses. 

"While the S&P CoreLogic Case-Shiller Index continues to show resiliency of home prices against surging borrowing costs, it also highlights continued headwinds for the housing market, namely elevated mortgage rates and severely lacking inventory of existing homes for sale," said Selma Hepp, CoreLogic's chief economist.

"And as mortgage rates continue to flirt in the 7% range, it will be difficult to convince existing homeowners to move right now," Hepp added.

Many economists, including those at CoreLogic, predict more modest price growth in 2024, somewhere in the 3% range. That's chiefly due to the expectation that the Federal Reserve will cut interest rates later this year, bringing more potential sellers and buyers into the market.

"Overall, the U.S. median home price will likely rise in 2024, but there will be a lot of variation, which will be strongly correlated with supply — both new construction and the inventory of existing homes for sale," said Lisa Sturtevant, chief economist at Bright MLS.

San Diego prices surged, Portland was nearly flat

All metros in the Case-Shiller 20-City Composite posted annual gains in December, with the average coming in at 6.1%. San Diego saw the strongest year-over-year price growth at 8.8%, followed by Detroit (8.3%) and Los Angeles (8.3%). 

Portland, Oregon, had the weakest annual growth at 0.3%, followed by Dallas (2.1%) and Denver (2.3%).

On a monthly basis, however, nearly all of the 20 cities experienced a drop in home prices between November and December. Portland had the biggest month-to-month slowdown, falling 1%, followed by San Francisco (down 0.9%), Boston (down 0.8%) and — despite its strong annual growth — San Diego (down 0.8%).

Las Vegas (0.2%), Los Angeles (0.1%)  and Miami (0.3%) eked out small monthly gains.

In the FHFA report, 49 states saw annual price growth, and several posted double-digit increases. The East Coast came out on top, with Rhode Island prices up 15.1% year-over-year, Vermont up 13.3% and West Virginia up 12.4%. 

Prices fell in just two areas: Hawaii (down 3.4%) and the District of Columbia (down 1.2%).

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