Home value growth is leveling off, but the Northeast and Midwest are performing better

National home value growth came to a virtual halt in April, with moderate gains in the Midwest and Northeast offsetting declines in many Sun Belt and Western metro areas, reflecting the continued fragmentation of the U.S. housing market.

Nationally, single-family home values, as measured by repeat transactions, rose 0.8% in April from a year ago, up from a 0.7% increase the month before, according to data from the S&P Cotality Case-Shiller Index released on Tuesday.

“With inflation accelerating to 3.8% in April, house prices have now fallen for the eleventh month in a row in real terms, further eroding inflation-adjusted housing wealth,” says Nicholas Godechead of the fixed income tradable bonds and commodities department S&P Dow Jones Indices.

At the metro level, Chicago was again the strongest market in April among the 20 cities tracked by the index, with an annual gain of 6.5%, followed by New York (3.8%) and Cleveland (3.2%).

For the second month in a row, home prices in Seattle, WA fell faster than any other major market, with the Pacific Northwest hub experiencing a 2.3% annual decline, followed by Denver, CO (-1.8%); Tampa, FL (-1.8%); Dallas, TX (-1.6%) and Phoenix, AZ (-1.7%).

“The affordability crunch remains a major headwind,” says Godec. “After previously dropping below 6%
This year, 30-year mortgage rates rose again to 6.3% in April, keeping financing costs high. In
In this higher interest rate environment, house price growth remains limited, while the housing market is largely under pressure
water in nominal terms and declining in real terms.”

Realtor.com® senior economist Anthony Smith points out that despite the brief period of relief for homebuyers in February, the spring selling season got off to a slow start before gaining any momentum, with existing home sales rising 3.2% in May to a five-month high of 4.17 million, and pending home sales rising 3.8%, up 4.8% year over year.

According to the economist, these are signs that buyers and sellers are finding more common ground, even if affordability problems remain.

Regional divisions persist

Looking at regional price trends, Smith notes that the list of declining metros has narrowed slightly since March, although more than half of the 20 markets tracked continued to show annual declines.

“The nearly 9 percentage point gap between Chicago and Seattle underscores how localized this housing cycle has become,” he says. “In markets where inventory has built up more quickly, new construction continues to provide an increasingly competitive alternative, showing that buyers of new construction homes can save an average of $25,000 in ownership costs over the first ten years compared to older existing inventory.”

With mortgage rates hovering around 6.5% for six weeks in a row, boosted by renewed inflation concerns and higher energy prices, Smith expects price growth to hold steady in supply-constrained markets even as the national picture continues to cool.

The Case-Shiller Index reports on a two-month lag and reflects a three-month moving average of home sales prices.

Homes typically go under contract a month or two before closing, so the March report mainly reflects purchasing decisions made during the winter months.

Although the Index’s price data is delayed by several months, it is considered one of the best available measures of changing home values ​​because it is based on repeated transactions of the same properties.