Housing prices in the United States rose 5.5 percent in December compared to the previous year, according to the S&P’s CoreLogic Case-Schiller 20-City Composite Home Price Index. The increase has pushed the cost of housing to crisis levels under Joe Biden’s presidency.
December’s increase marks the seventh consecutive month that home prices increased. The U.S. housing market has remained ‘hot’ despite the Federal Reserve keeping interest rates elevated. While some Fed observers expected the central bank to begin cutting rates already, Fed Chairman Jerome Powell and members of the Board of Governors have signaled a reduction in interest rates may be delayed until after the November 2024 election.
The hope of a Fed rate cut pushed mortgage rates for residential property down slightly in early December. This slight drop, in part, fueled an increase in home purchases during that month.
Elevated mortgage rates and home prices have sparked a renewed housing affordability crisis in the U.S. The Biden government has thus far failed to tackle continued inflation fears. Two weeks ago, the inflation rate increased to 3.1 percent, exceeding projections by leading economists.
Even when the Fed finally moves to cut interest rates, there is likely to be little relief for homebuyers. As mortgage rates fall, more buyers are expected to enter the housing market. [B]uyers are anxiously waiting to jump in the market as soon as mortgage rates fall,” Dr. Selma Hepp, chief economist with CoreLogic, noted. She added: “That means that 2024 will show another year of home price highs.”
