Home Value Growth Slows Dramatically in January

National growth in home values slowed dramatically in January, marking the weakest start to the year for prices in more than a decade.

Nationally, the value of single-family homes as measured by repeat transactions rose 0.9% in January compared to a year earlier, according to data from the S&P Cotality Case-Shiller Index released Tuesday.

That was down from the 1.3% annual gain recorded in December and marked the weakest January growth figure since 2012.

Among the 25 major cities tracked by the index, New York had the strongest annual home price growth at 4.9%, followed by Chicago (+4.6%) and Cleveland (+3.6%). Meanwhile Tampa saw the biggest decline, with prices falling 2.5%.

Notably, the slowdown in national price growth came even as mortgage rates eased considerably. The 30-year fixed mortgage averaged 6.10% in January, a more than three-year low, according to Freddie Mac.

That reprieve on rates proved to be brief, with rates rising sharply in the meantime due to the war with Iran, dimming prospects for a strong spring housing season.

"Affordability continues to be a major constraint on the housing market," says BrightMLS Chief Economist Lisa Sturtevant. "Prospective buyers are waiting for both lower rates and slower price growth and are increasingly asking for concessions from sellers, leading to a more balanced negotiating environment between buyers and sellers."

Realtor.com® Senior Economist Anthony Smith says recent housing activity continues to reflect a market "stabilizing from a low base rather than building toward a broader rebound."

"The lock-in effect is gradually easing as the share of mortgages at 6% or higher grows," he says. "However, the majority of homeowners still carry rates well below current market levels, constraining the flow of new listings and keeping resale inventory from recovering more meaningfully."

Regional divides widen further

Underneath the national average, the divergence in regional home price trends continued to widen, with Northeast and Midwest metros still posting the strongest performance.

"These markets continue to benefit from tighter resale inventory and more constrained new supply," says Smith.

Meanwhile, many markets in the South and West continued to post annual declines, including Denver (-2.05%), Phoenix (-1.59%) and Dallas (-1.47%).

"Markets that experienced outsized pandemic-era appreciation continue to see more persistent normalization as inventory rebuilds and demand remains payment-sensitive," notes Smith.

Meanwhile, a spring housing season that had initially looked promising for buyers now faces derailment, as the Iran war drives mortgage rates higher and erodes recent affordability gains.

Rates jumped to 6.38% last week and are expected to continue marching higher in response to an oil price shock caused by the Middle East conflict.

"Whether the recent rate reversal proves temporary or persistent will go a long way toward shaping price dynamics and sales activity through the spring," says Smith. "A sustained return to lower rates could help unlock more demand, but the pace of any recovery will depend heavily on whether fresh listings keep pace."