After home prices fell during the latter half of 2022 and markets across the country cooled, prices have been increasing nationally in 2023. Home prices increased by 0.7% on a monthly basis in August, marking an eighth consecutive month of growth, according to analysis of the Freddie Mac House Price Index by the Harvard Joint Center for Housing Studies. The growth in prices is somewhat slower than what occurred in 2021 but, when combined with higher interest rates, is putting homeownership (and the associated wealth-building opportunities) out of reach for a growing number of households.
Home price growth lifts prices nationwide
The resumption of home price growth has been widespread across the country as inventories remain constrained in most markets. In August 2023, home prices increased on a monthly basis in 93 of the 100 largest metros in the country. Prices in the Northeast markets of Rochester and Syracuse led all large markets in this growth (respectively up 1.5% and 1.4%), while prices in some markets in the South (McAllen up 1.3%) and West (San Diego up 1.3%) followed closely.
This is a sharp turnaround compared to just over a year before, in July 2022, when monthly home prices increased in just 20 large markets (a low since the beginning of the pandemic). In fact, prices in nearly three-quarters of the top 100 markets grew by over 0.5% on a monthly basis in August 2023, while no markets saw price growth above that rate the year before.
Home price growth rate modest annually
In markets where home prices rose annually in August 2023, the increases were modest compared to the exceptionally high annual growth rates of the past two years. In fact, Syracuse (12.6%), McAllen (12.3%) and Rochester (11.6%) were the only large markets with double-digit home price growth in August, compared to nearly two-thirds of 100 large markets in August 2022 and 99 markets in August 2021.
More broadly, on an annual basis, as of August 2023 home prices had grown in 87 of the 100 largest markets. But in 85 of those markets, the annual home price growth rate in August 2023 was more modest than in August 2022. Softening was especially sharp in Florida markets; for example, in North Port prices rose just 1.5 percent in August 2023 compared to 27.4 percent a year earlier.
Even though markets cooled in 2022, home prices have risen substantially since the start of the pandemic in nearly every metro area. Indeed, across all 100 large markets, between February 2020 and August 2023 prices grew an average of two times as much as in the previous three and a half year period.
