U.S. home prices reached new peaks in July, although regional differences remain as to the strength of the markets, a pair of monthly indices reported.
The Federal Housing Finance Agency July's index of 409.5 was 0.8% higher than June's. On a year-over-year basis, the index increased by 4.6% from 391.5.
This is the high for the seasonally adjusted purchase-only index, which was at 100 for January 1991.
Even though the FHFA index has increased every month since August, it is only since the start of 2023 that these gains have been large, with four of the past six months in the range of 0.8%.
June's month-to-month gain was revised upward to 0.4%.
"Regionally, all nine census divisions posted positive price appreciation over the last 12 months, although the Pacific and Mountain divisions experienced only modest growth," said Nataliya Polkovnichenko, supervisory economist in the FHFA's Division of Research and Statistics, in a press release.
Meanwhile, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index rose 1% on an annual basis in July, the first increase in three months. Compared with June, it was 0.6% higher.
"The increase in prices that began in January has now erased the earlier decline, so that July represents a new all-time high for the National Composite" said Craig Lazzara, managing director at S&P Dow Jones Indices, in a report. "Moreover, this recovery in home prices is broadly based."
Out of 20 cities that the Case-Shiller Index spotlights, 10 are at an all-time high. And on a seasonally adjusted basis, values in all 20 rose compared with June.
"That said, regional differences continue to be striking," Lazzara said. "On a year-over-year basis, the Revenge of the Rust Belt continues," as prices were down in the west, off by 3.8% and the southwest, 3.6% lower.
The west in particular, is still recovering from larger declines during 2022, said Selma Hepp, CoreLogic chief economist, in a separate press release. But still, this report proves home price gains nationwide have been solid.
But first-time home buyers in particular are being hampered by these rising values. "Lower-priced homes are seeing stronger recovery given the lack of affordable inventory and more demand pressure put on that segment," Hepp noted.
First American Financial's Real House Price Index increased in July by 16.9% on an annual basis and by 2% compared with June.
As a result, consumer house buying power is 11% lower than it was in July 2022; the month-to-month reduction was 1%.
Home affordability is at its lowest level in over three decades, said Mark Fleming, First American's chief economist.
"Two factors drove the sharp annual decline in affordability — a 4% annual increase in nominal house prices and a 1.4 percentage point increase in the 30-year, fixed mortgage rate compared with one year ago," Fleming said in a press release. "For home buyers, holding prices constant, the only way to mitigate the loss of affordability caused by higher mortgage rates is with an equivalent, if not greater, increase in household income."
A 3.7% increase in household income since July 2022 is not enough to offset the annual decline in affordability, he continued.
Of 50 markets tracked by First American, 24 are considered to be overvalued; one year earlier, just 15 areas merited this status.
Fitch Ratings, using its own methodology, found over 80% of metro areas to have unsustainably high prices.
In the FHFA report, the Pacific region had a 0.3% month-to-month gain, and a 0.5% annual gain; the Mountain region, it was 0.8% and 0.3% respectively.
The New England region had a particular dichotomy. It had the largest increase at 8.1% over the past 12 months, but was up just 0.3% from June.
However, three regions saw strong price increases from June, with the Middle Atlantic and South Atlantic both up 1.4%, and the East North Central 1.2% higher.
These were the next three regions behind New England in terms of annual price growth. Middle Atlantic homes grew 7.1%; East North Central, 7%; and South Atlantic, 6.3%.
