Housing Market Posts Positive Indicators But Home Prices Remain Elevated

The housing market may be impossible for the average American now, but hold on a while longer: it’s heading in the right direction.

That’s ICE’s message, at least, with its latest Mortgage Monitor report, which revealed a mix of good and not-so-good data about the state of homebuying.

Affordability is improving, for one, as rates come down. The share of income required to purchase the median home fell close to 5 percentage points from October 2023’s peak.

Stock is also slowly recovering, up for a seventh consecutive month. Lack of inventory has contributed to high prices and competition, making the bidding process a nightmare for many buyers in the last few years.

But home price appreciation remains off the charts. ICE’s Home Price Index for December was up 5.6% YOY, increasing from +5.1% in November.

While price growth at that level would spook any sensible buyer, ICE Vice President of Enterprise Research Strategy Andy Walden says improvements may be coming slowly, but they’re still en route. 

For one thing, prices are moderating month-over-month. This report reflects some lingering effects of last year’s insane growth; moving forward, the data should show an easier market.

“As always, the truth of the situation is more nuanced than one simple, backward-looking metric might suggest, and the data holds some encouraging signals,” Walden said.

“In recent months, we’ve seen improvement in rates, affordability, and for sale inventory, with monthly home price growth moderating on a seasonally adjusted basis. While we are still out of sync with historical norms on multiple fronts, each of those metrics have at least been moving in the right direction.”

Walden’s idea was recently borne out in S&P CoreLogic’s latest Case-Shiller U.S. National Home Price NSA Index, which reported prices declining for the first time in nine months. But it’s worth noting that turnaround came on the heels of another record high the month prior.

Whether buyers should prioritize locking in a lower interest rate or picking a cheaper home depends on their goals and individual finances. But soaring prices impact monthly payments, too, and can keep homeownership out of reach for many. Lower-priced homes can also build equity faster, making refinancing easier.

“Those who are very motivated to purchase a home should be prepared for the sticker shock associated with the increased expense of financing the purchase,” Bankrate Senior Economic Analyst Mark Hamrick noted.

“Part of the flexibility that may be required includes seeking a possible downgrade of footprint or quality of the home, along with the neighborhood, in order to achieve an affordable purchase.”

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