Home prices grew more quickly than usual at the end of 2023 to finish at an all-time high. It’s a side effect of the market for existing homes that dried up as mortgage rates rose.

Prices rose 6.1% from year-ago levels in the S&P CoreLogic Case Shiller Home Price Indices, which tracks prices in 20 of the nation’s largest cities, up from 5.4% in November, and beating FactSet consensus estimates that called for a 5.9% increase. Prices nationally rose 5.5%.

National home prices on a seasonally-adjusted basis reached a record level in December, Brian D. Luke, S&P Dow Jones Indices’ Head of Commodities, Real & Digital Assets, said in a statement. “Looking back at the year, 2023 appears to have exceeded average annual home price gains over the past 35 years,” he said, adding that “with trend growth at the national level of 4.7%, a 5.5% return demonstrates solid, steady growth.”

The 5.5% home price gain was the strongest since last December, historic data show. Prices cooled at the beginning of 2023 as high mortgage rates sent buyers to the sidelines, and dipped below year-ago levels in April and May. While December’s annual gain was faster than normal, it fell short of the turbo-charged pandemic price gains. Prices ended 2021 up 19%, and 2020 up 10%.

Prices grew most quickly in San Diego, Los Angeles, and Detroit, up between 8.3% and 8.8% than year-ago levels. Prices grew the most slowly in Portland, Ore., Dallas, and Denver, with growth between 0.3% and 2.3%.

After seasonal adjustment, prices rose 0.2% in November from December, both nationally and in the 20-city index. Economists polled by FactSet had expected a 0.15% month-over-month gain in the 20-city index.

The measure lags other home price indicators, but is watched by economists because of its methodology, which minimizes the impact of home size or type, and is reported as multiple indices with both unadjusted and seasonally adjusted data. More frequent—though less comprehensive—data can give investors an idea of where prices are headed from there.

The median existing-home price measured by the National Association of Realtors gained 5.1% from year-ago levels in January, the trade group said last week. Lawrence Yun, the trade group’s chief economist, said it was the first time in over a year that home price gains outpaced wage gains, Barron’s previously reported.

January’s existing-home sale price growth was the fastest since October 2022—but sales remained sluggish, with the seasonally adjusted annual rate of sales clocking in at a lower-than-average 4 million, the trade group said last week.

The combination of high price growth and relatively low sales volume points to scarce inventory of homes for sale. It would take three months to sell every home listed at the end of January, according to the trade group. The course of home prices this spring comes down to supply, NAR’s Yun said last week.

The new home sales market illustrates the impact of more supply on prices. Sales perked up in January, rising 1.5% to a seasonally adjusted annual rate of 661,000, Census data show. It would take more than eight months to sell every new home listed at January’s sales pace. The median new home price in January was $420,700, down 2.6% from January 2023.

So far, prices tracked by
Redfin
have remained strong. The median sale price in metros tracked by the brokerage was $365,000 in the four weeks ended Feb. 18, up about 6% from the year prior. Homes new to the market were asking just under $400,000, the data show.

Write to Shaina Mishkin at [email protected]