Redfin Home Price Index: Prices Rose 0.4% in December—the Smallest Increase in Six Months

Rhea-AI Summary

Redfin's latest report reveals that U.S. home prices climbed 0.4% month over month in December, marking the smallest increase since June. On a year-over-year basis, prices rose 6.6%. The report also highlights that price growth is slowing, supply is on the rise, and mortgage rates have fallen significantly since their October peak. However, housing supply remains far below pre-pandemic levels, preventing home prices from dropping as buyers compete for a limited pool of homes. The report also points out that prices dropped fastest in Austin, TX, and climbed fastest in Chicago.

Insights

Market Research Analyst

The recent data indicating a modest 0.4% month-over-month increase in U.S. home prices, with a 6.6% rise on a year-over-year basis, reflects a deceleration in the housing market. The slowing in price growth can be attributed to a combination of high mortgage rates and a slight uptick in housing supply. Despite these factors, the market has not experienced a decline in prices due to the persistently low inventory levels relative to demand.

From a market research perspective, the stabilization of price growth at a rate comparable to pre-pandemic levels suggests a return to a more balanced market. This normalization may indicate that the market is adjusting to economic pressures, such as the increased cost of borrowing and adapting to a new equilibrium. The regional variations, with some metropolitan areas like Austin experiencing price declines while others like Chicago saw increases, highlight the localized nature of real estate markets and the importance of monitoring regional trends for a comprehensive market understanding.

Financial Analyst

The report from Redfin is significant for investors as it provides early signals of trends in the real estate sector, which can have broader implications for the economy and stock market. The housing sector is a critical component of the economy and can influence consumer confidence and spending. The observed slowdown in price growth, coupled with the slight increase in new listings, could be indicative of a cooling market, which may lead to a shift in investor sentiment towards real estate-related stocks and funds, including homebuilders, REITs and mortgage lenders.

Furthermore, the report's findings could have implications for the Federal Reserve's monetary policy decisions, as housing market trends are a key consideration in assessing inflationary pressures and economic health. Investors would do well to monitor these developments as they may impact interest rates and, consequently, the cost of borrowing for consumers and businesses alike.

Economist

From an economic standpoint, the slight increase in housing supply and the deceleration of home price growth are noteworthy. These trends are occurring in the context of historically high mortgage rates, which have reduced purchasing power and tempered demand. The Redfin report suggests that while the market is becoming more buyer-friendly, the supply constraints still present a barrier to significant price reductions.

The housing market's response to these dynamics is crucial for economic forecasting. A balanced housing market can contribute to stable economic growth, but persistent supply shortages could exacerbate affordability issues and potentially dampen consumer spending. The regional disparities in price changes underscore the uneven economic recovery across different parts of the country, which policymakers and stakeholders must consider when devising economic strategies.

High mortgage rates and an uptick in housing supply took some pressure off price growth, but prices aren’t falling because inventory is still low

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — U.S. home prices climbed 0.4% month over month in December—the smallest increase since June—according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. December represented the third straight month of slowing price growth. On a year-over-year basis, prices rose 6.6%.

This is according to the Redfin Home Price Index (RHPI), which is similar to the S&P CoreLogic Case-Shiller Home Price Indices but publishes more than one month earlier. December data covers the three months ending Dec. 31, 2023. Read the full RHPI methodology here.

"Many home purchases that closed in December were negotiated in November, when mortgage rates were near the highest level in over two decades. That likely depressed home price growth because buyers were grappling with limited purchasing power," said Redfin Senior Economist Sheharyar Bokhari.

Home price growth also likely slowed in December because the housing shortage eased slightly, giving buyers more options to choose from; new listings rose 0.1% to the highest seasonally adjusted level since September 2022. Still, housing supply remained far below pre-pandemic levels, preventing home prices from dropping as buyers compete for a limited pool of homes.

Overall, homebuying conditions have been improving. Price growth is slowing, supply is on the rise and mortgage rates have fallen significantly since their October peak. Price growth also appears to be normalizing as the housing market becomes more balanced; the 0.4% gain in December is roughly in line with monthly increases that occurred the years leading up to the pandemic.

“Homebuyers can take solace in the fact that prices are unlikely to balloon again like they did during the pandemic homebuying frenzy, but they probably won’t fall any time soon, either,” Bokhari said. “That’s because supply isn’t growing enough to bring prices down, and mortgage rates are no longer falling enough to drive prices up significantly.”

Prices Dropped Fastest in Austin, TX and Climbed Fastest in Chicago

Fifteen of the 50 most populous U.S. metropolitan areas posted month-over-month price decreases in December, though all but one of those declines were less than 1%. In Austin, TX, prices fell 1.1%—the biggest drop among the metros Redfin analyzed. Next came Oakland, CA (-0.9%), Sacramento, CA (-0.8%), Miami (-0.6%) and Nashville, TN (-0.6%).

In Chicago, home prices rose 2.6% month over month—the largest increase among the 50 most populous metros. Rounding out the top five are San Jose, CA (1.7%), Pittsburgh (1.6%), Virginia Beach, VA (1.4%) and Charlotte, NC (1.1%).

To view the full report, including a chart and metro-level summary, please visit: https://www.redfin.com/news/redfin-home-price-index-december-2023/

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240123606604/en/

Redfin Journalist Services:

Isabelle Novak, 414-861-5861

press@redfin.com

Source: Redfin

FAQ

What is the year-over-year increase in U.S. home prices according to Redfin's report?

U.S. home prices rose 6.6% year over year according to Redfin's report.

What were the reasons behind the slowing home price growth in December according to Redfin's report?

The slowing home price growth in December was due to high mortgage rates, an uptick in housing supply, and limited purchasing power of buyers.

Which city experienced the fastest decrease in home prices in December according to Redfin's report?

Austin, TX experienced the fastest decrease in home prices in December, with a 1.1% drop.

What was the largest month-over-month increase in home prices among the 50 most populous U.S. metropolitan areas according to Redfin's report?

Chicago experienced the largest month-over-month increase in home prices among the 50 most populous U.S. metropolitan areas, with a 2.6% rise.

Where can the full report including a chart and metro-level summary be viewed?

The full report, including a chart and metro-level summary, can be viewed at https://www.redfin.com/news/redfin-home-price-index-december-2023/