U.S. home prices marked a steady rise in January, climbing 0.5% month-over-month, according to a report from Redfin, the tech-powered real estate brokerage. This matches the 0.5% gain observed in both December and November. When compared to the previous year, prices rose 6.7%, marking the largest year-over-year increase in a year.
The figures are based on the January Redfin Home Price Index (RHPI), which tracks home price changes over three months, ending on January 31, 2024.
Sheharyar Bokhari, Senior Economist at Redfin, attributed the steady price growth to several factors. “Many of the home purchases that closed in January were negotiated at the end of last year when mortgage rates experienced the most significant drop since 2008,” he explained. “The decline in rates gave buyers more purchasing power, and for some, a sense of urgency to lock in a mortgage.”
Bokhari also pointed to the ongoing shortage of homes for sale as a contributing factor to the price increase. New listings fell 1.2% month over month in January on a seasonally adjusted basis, the first drop since June, and remained well below pre-pandemic levels. Many homeowners are hesitant to give up their rock-bottom mortgage rates, with a majority of homeowners still having rates below current levels.
The report highlighted geographical variations in home price changes. Montgomery County, PA, led the way with home prices rising 3.7% from a month earlier in January—the biggest increase among the 50 most populous U.S. metropolitan areas. Philadelphia, Baltimore, Cleveland, and New York followed suit with increases ranging from 1.6% to 1.9%.
Conversely, thirteen metropolitan areas saw price declines. Charlotte, NC, experienced the most significant drop, with home prices falling 0.7% month over month. San Francisco, Austin, TX, San Diego, and Sacramento, CA, also saw declines ranging from 0.4% to 0.6%.
The report highlights the complex dynamics at play in the U.S. housing market. Despite a shortage of homes for sale and falling mortgage rates, home prices have continued to rise. This can be attributed to heightened buyer demand, fueled by low rates and a sense of urgency to secure mortgages. However, as the geographical variations indicate, the impact of these factors varies across regions, reflecting the multi-faceted nature of the real estate market.
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