Kiplinger Housing Outlook: Monthly Home Price Growth Falls for First Time Since 2023

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Home prices continue to push higher, but at a slower pace. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which measures the price of existing homes across the nation, rose 3.4% in March from a year earlier, down from a 4% annual gain in the previous month. On a month-over-month, seasonally adjusted basis, home prices fell 0.3%. While low house affordability continues to weigh on demand, a limited supply of homes for sale is supporting continued price growth. New York reported the strongest gains over the year, followed by Chicago and Cleveland. Homes prices in Tampa fell 2.2% over the year, the weakest return in the 20 cities covered by the index.

The rebound in housing starts in April is likely to be short-lived. Total housing starts rose 1.6%, to 1.36 million annualized units, in April. The gain was the result of a jump in multifamily construction, which was more than enough to offset a slip in single-family starts. Regionally, total starts rose in the Northeast, Midwest and West and fell the South. Single-family starts dropped 2.1%, while multifamily starts, which are very volatile on a monthly basis, rose 10.7% during the month. Single-family permits fell 5.1%, while multifamily permits decreased 3.7%. The decline in building permits indicates that demand remains volatile amid trade policy and overall financial uncertainty. As mortgage rates remain elevated, builders have stepped up their use of mortgage rate buy-downs and other incentives to soften the impact of higher rates. That said, builders are also becoming more cautious on account of rising uncertainty due to the impact of tariffs on the industry.

New home sales rose sharply in April, up 10.9%, to a seasonally adjusted annual rate of 743,000 units. The new home market continues to benefit from a tight supply of existing homes for sale and builder incentives that help make new homes more affordable for buyers. The median price of a new home now stands at $407,200, higher than a month ago but 2% lower than a year ago. While the new-home market has been less sensitive to changes in mortgage rates thanks to the incentives offered by builders, rates staying above 6% will likely continue to discourage some buyers in the months ahead. The inventory of new homes has risen 8.6% over the past 12 months. At the current sales pace, that inventory would last 8.1 months.

Existing home sales fell despite a temporary drop in mortgage rates. Sales of previously owned homes slipped 0.5%, to 4.0 million annualized units, in April. Existing home sales continue to run at a slow pace as buyers contend with elevated financing costs, high home prices and limited inventory. Mortgage applications, which lead sales by a month or two, rose in May, which leaves them just shy of where they were in January and very low by historical standards. The total inventory of existing homes on the market rose 9% from a year ago. This translates to 4.4 months of supply at the current sales pace, up from 4 months in March.

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