High mortgage rates and an uptick in housing supply took some pressure off price growth, but prices aren’t falling because inventory is still low

(NASDAQ: RDFN) — U.S. home prices climbed 0.4% month over month in December—the smallest increase since June—according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. December represented the third straight month of slowing price growth. On a year-over-year basis, prices rose 6.6%.

This is according to the Redfin Home Price Index (RHPI), which is similar to the S&P CoreLogic Case-Shiller Home Price Indices but publishes more than one month earlier. December data covers the three months ending Dec. 31, 2023. Read the full RHPI methodology here.

"Many home purchases that closed in December were negotiated in November, when mortgage rates were near the highest level in over two decades. That likely depressed home price growth because buyers were grappling with limited purchasing power," said Redfin Senior Economist Sheharyar Bokhari.

Home price growth also likely slowed in December because the housing shortage eased slightly, giving buyers more options to choose from; new listings rose 0.1% to the highest seasonally adjusted level since September 2022. Still, housing supply remained far below pre-pandemic levels, preventing home prices from dropping as buyers compete for a limited pool of homes.

Overall, homebuying conditions have been improving. Price growth is slowing, supply is on the rise and mortgage rates have fallen significantly since their October peak. Price growth also appears to be normalizing as the housing market becomes more balanced; the 0.4% gain in December is roughly in line with monthly increases that occurred the years leading up to the pandemic.

“Homebuyers can take solace in the fact that prices are unlikely to balloon again like they did during the pandemic homebuying frenzy, but they probably won’t fall any time soon, either,” Bokhari said. “That’s because supply isn’t growing enough to bring prices down, and mortgage rates are no longer falling enough to drive prices up significantly.”

Prices Dropped Fastest in Austin, TX and Climbed Fastest in Chicago

Fifteen of the 50 most populous U.S. metropolitan areas posted month-over-month price decreases in December, though all but one of those declines were less than 1%. In Austin, TX, prices fell 1.1%—the biggest drop among the metros Redfin analyzed. Next came Oakland, CA (-0.9%), Sacramento, CA (-0.8%), Miami (-0.6%) and Nashville, TN (-0.6%).

In Chicago, home prices rose 2.6% month over month—the largest increase among the 50 most populous metros. Rounding out the top five are San Jose, CA (1.7%), Pittsburgh (1.6%), Virginia Beach, VA (1.4%) and Charlotte, NC (1.1%).

To view the full report, including a chart and metro-level summary, please visit: https://www.redfin.com/news/redfin-home-price-index-december-2023/

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with same day tours, and our lending and title services help them close quickly. Customers selling a home in certain markets can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we've saved customers more than $1.5 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

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