Home price growth slowed to the weakest pace in years in January, while inflation outpaced gains for the eighth consecutive month.
The S&P Coality Case-Shiller Index showed a 0.9% annual gain for January, the first time it’s fallen below 1% since 2023. Considering inflation at 2.4% year over year, home values are modestly lower when adjusted for rising costs.
This stall continues after double-digit home price growth during the pandemic. Mortgage rates hover around 6%, double pandemic-era lows, and have left many homeowners locked in as they are reluctant to sell in exchange for a home with a higher rate. Winter weather has also lessened sales across northern markets, further contributing to the slowdown.
However, the Case-Shiller index’s two-month delay has not yet picked up on early signs of a seasonal rebound. Experts say buyers are seeing more options as the spring home shopping season approaches, giving them more leverage.
“If you’re a buyer who can afford to move right now, you have more bargaining power than you’ve had in a long time,” said Orphe Divounguy, senior economist at Zillow. He said that while buying a home is still challenging for many, particularly first-time buyers, a cooling market and higher inventory have shifted the odds to their favor.
Arthur Gailes, research fellow at the American Enterprise, agrees. “We’re kind of at a turning point between the seller’s market that we’ve been in for the past decade and a half and the buyer’s market that we were beginning to enter,” he said.
On the ground, real estate agents are seeing how that plays out in certain neighborhoods. Erica Collica Swink, an associate broker at Max Broock Realtors in Detroit, said that during the harsh Michigan winter, her firm was down around 10% because of a lack of movement in the market. Now, though, there are signs activity is picking up.
“There’s more listings in the past two or three weeks than I’ve seen all year,” Swink said.
Despite the increased spring supply, mortgage rates remain high and are shaping buyer behavior. Potential buyers are looking for the perfect fit, not necessarily a starter home. “There are buyers that are looking for two years because they want a very specific thing,” said Swink. “I’ve done more second, third, and fourth showings than I think I’ve done ever. I just had a closing the other day where I think the guy looked at it six times.”
Sellers are also facing pressure. “Some sellers have a number in their mind that they thought that they could achieve,” Swink said. When they can’t get an offer at their target price, they “either remove it from the market or pivot to a lower price point.”
The Case-Shiller index also misses recent uncertainty due to the Iran conflict, which has pushed mortgage rates to a high of 6.44% last week. While still below the highs of 7% last year, higher inflation from oil shocks would continue to erode purchasing power and further affordability concerns for families looking to purchase a home.
Even as home prices are depreciating with inflation at a national level, face value prices haven’t declined much for some metro areas. New York showed a 4.9% annual gain, Chicago had 4.6%, and even metros like Milwaukee have shown major home price upticks. In contrast, some Sun Belt cities, such as Tampa, saw a 2.5% decline, while Phoenix was down by 1.6%.
While the balance of power in the housing market may be shifting, borrowing costs are still high, and home prices are steady in many markets, keeping many potential buyers on the sidelines.