Home prices continued climb in October, surveys show

11:54 am Tuesday, December 26th, 2023

By Amina Niasse

NEW YORK (Reuters) -Annual home prices in October rose again, pointing toward continued recovery of the housing market, data on Tuesday showed.

A Federal Housing Finance Agency (FHFA) report showed home prices grew 6.3% on a yearly basis, up from a revised 6.2% the month prior.

Annual price growth began to accelerate in June after declining steadily since February 2022. Prices increased moderately by 0.3% on a month-to-month basis after climbing by 0.7% the month before.

Rates on the most common home loan neared 8% in October, reaching a two-decade high on the back of the Federal Reserve’s rate hike cycle.

The Fed left its policy benchmark interest rate unchanged for three consecutive meetings, bolstering expectations of a closing rate hike cycle and stoking a rally in the bond market.

The average rate on a 30-year fixed-rate mortgage fell below 7% in December, as yields on mortgage-backed securities headed down. Existing home sales have risen moderately since then, gaining 0.8% in November and indicating softening rates may draw sellers from the sidelines and open up inventory to prospective buyers, a National Association of Realtors report released in December showed.

“The lack of inventory in the housing market has continued to affect the sector and has reduced the effects of higher mortgage rates,” said Eugenio Aleman, chief economist at Raymond James. “This decline in mortgage rates is likely to push future HPI readings higher as more buyers enter the market and the supply of homes remains limited.”

A separate national price index released by S&P Core Logic/Case-Shiller showed home prices gained by 4.8% on a yearly basis in October, the largest rate this year.

The Mid-Atlantic and New England regions experienced the largest gains in October, of 9.9% and 9.7%, respectively, according to the FHFA report. On a city basis, Detroit and San Diego posted the largest annual growth in home prices, the Case-Shiller data showed.

(Reporting by Amina Niasse; Editing by Chizu Nomiyama)