What are the implications of stable prices for the housing market?
US home prices experienced moderate growth in 2024, reflecting a slowdown in the housing market as rising mortgage rates and increased inventory tempered price increases, according to the December 2024 Home Price Index (HPI) released by First American Data & Analytics.
The report, which measures single-family home price trends at national, state, and metropolitan levels, revealed a 3.9% year-over-year increase in home prices in December 2024. This marked a sharp deceleration compared to the beginning of the year, when annualized price growth reached 7%.
Chief economist Mark Fleming attributed the moderation to higher mortgage rates in the latter half of the year and a rise in available housing inventory. “The structural housing shortage nationally will keep a floor on how low prices can go,” Fleming said, “but a ‘higher-for-longer’ rate environment and inventory growth could cause further price moderation.”
Regions with faster growth in housing supply relative to demand were more likely to experience price declines, while areas with limited new supply maintained steadier growth. Notably, Pittsburgh saw the highest year-over-year growth in its starter-tier home prices, with a 9.5% increase. Cambridge, Massachusetts, and New York City also recorded robust gains, while areas like Tampa, Florida, and Oakland, California, experienced price declines.
National trends
House prices nationally are now 54.8% higher than pre-pandemic levels in February 2020, underscoring the lasting impact of the housing market boom during the COVID-19 pandemic. Month-over-month growth from November to December 2024 was modest at 0.1%, highlighting the ongoing cooling trend.
Local market performance varied significantly by price tier. Starter homes in Pittsburgh and Cambridge showed strong growth, while mid-tier and luxury home prices displayed slower, yet stable, appreciation across most regions.
Fleming suggested that if current conditions persist, the housing market in 2025 could see “very moderate price appreciation.” Areas with sustained inventory growth may face continued price softening, while markets with tighter inventories could experience a rebound in price growth.
The HPI, based on more than 46 million paired property transactions, uses a comprehensive methodology that incorporates public sales records, MLS data, and appraisal data to measure price changes across market segments. The next HPI update from First American Data & Analytics is scheduled for the week of February 17, 2025.
Do you have something to say about the recent analysis? Share your thoughts in the comments below.