NEW YORK — U.S. home price growth hit a new high in January, widening the gap between homeowners and renters.
Nationwide, home prices grew 4.1% in January from a year earlier, up from a 3.9% annual gain in the previous month, according to the latest S&P CoreLogic Case-Shiller Index data released on Tuesday.
The index’s composite of the 20 largest metro areas posted a year-over-year increase of 4.7%, up from a 4.5% increase in the previous month. New York metro areas reported the highest increase, 7.7%, followed by Chicago and Boston, with annual increases of 7.5% and 6.6%, respectively.
The continued rising home prices draw a massive line between homeowners and renters, pulling away from each other.
“Despite the near-term softness, the S&P CoreLogic Case-Shiller Index remains historically elevated, and long-term homeowners have continued to build equity,” said Nicholas Godec, an economist at S&P Dow Jones Indices.
These steady price increases reflect strong demand and limited housing supply.
Homeowners are benefiting from housing values that keep rising and from relatively stable housing costs. That is especially true for those who bought a house before 2022, when the mortgage rates were historically low, under 4%, compared to about 7% today.
Renters, however, have faced rising monthly rent payments and are finding it increasingly difficult to find homes they can afford to buy.
The driving gap between homeowners and renters is accelerating financial disparities and fueling concerns about long-term housing affordability.
Many Americans are feeling the strain.
Roger Shulman, a resident who lived in Fairfield, Connecticut, has struggled with finding affordable housing, but he counts himself as lucky to finally find one.
“Almost everyone I know has struggled to find affordable housing, having to make cost a priority when looking for a place to raise their family or enjoy their retirement. Housing costs are out of control,” said Schulman.
The housing market has experienced several turbulent shifts in recent years. During the pandemic period, record-low interest rates helped the housing market boom, increasing home values by 30-50% in some areas. However, the Federal Reserve aggressively raised interest rates to cool inflation, causing mortgage rates to rise above 7%, which made it more expensive for new home buyers.
“Most of our surveys on weekly home prices are saying that they have stabilized and are starting to accelerate here,” said Stan Shipley, managing director at Evercore ISI, “if you want to get home demand up and keep going ahead, you need to get mortgage rates down because it’s the only tool you would have.”
To address housing affordability issues, many states like Connecticut and California are making more policies to build more affordable housing. However, local communities have opposed the mandates to protect their community characters, which adds to the affordable housing crisis.
“Local resistance to housing development limits supply, which impacts housing markets and growth,” said Jennifer Raitt, the executive director of Northern Middlesex Council of Governments, Lowell, Massachusetts. “Preventing homes near jobs creates workforce shortages and slows regional economic growth.”
The tariffs on steel and aluminum imposed by President Donald Trump, making building homes more expensive, add more challenges to the housing market.
All these factors are leaving renters and prospective homebuyers searching for a way to bridge the widening financial gap.
“Affordable housing is a major concern not only in my community but across the country,” said Schulman, “anyone who is looking for housing quickly finds out that this part of the American dream is fading.”