Home Value Growth Flatlines but Northeast and Midwest Outperform

National home value growth ground to a near standstill in April, with moderate gains in the Midwest and Northeast offsetting declines in many Sun Belt and Western metros, reflecting the ongoing fragmentation of the U.S. housing market.

At the national level, the value of single-family homes as measured by repeat transactions rose 0.8% in April compared to a year ago, up from a 0.7% increase the month prior, according to data from the S&P Cotality Case-Shiller Index released Tuesday.

"With inflation accelerating to 3.8% in April, home values have now declined in real terms for an 11th straight month, further eroding inflation-adjusted housing wealth," says Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices.

At the metro level, Chicago was again the strongest market in April among the 20 cities tracked by the index, boasting a 6.5% annual gain, trailed by New York (3.8%) and Cleveland (3.2%).

For the second consecutive month, home values were falling faster in Seattle than in any other major market, with the Pacific Northwest hub seeing a 2.3% annual plunge, followed by Denver (-1.8%); Tampa, FL (-1.8%); Dallas (-1.6%), and Phoenix (-1.7%).

"The affordability pinch remains a key headwind," says Godec. "After dipping below 6% earlier
this year, 30-year mortgage rates climbed back to 6.3% in April, keeping financing costs elevated. In
this higher-rate environment, home price growth remains constrained, with housing largely treading
water in nominal terms and falling in real terms."

Realtor.com® senior economist Anthony Smith points out that despite the brief window of relief for homebuyers in February, the spring selling season got off to a slow start before gaining some momentum, with existing-home sales rising 3.2% in May to a five-month high of 4.17 million, and pending home sales climbing 3.8% with a 4.8% year-over-year gain.

According to the economist, these are signs that buyers and sellers are finding more common ground even as affordability challenges persist.

Region divides persist

Looking at regional price trends, Smith notes that the list of declining metros narrowed slightly from March, although more than half of the 20 tracked markets continued to post annual declines.

"The nearly 9-percentage-point gap separating Chicago from Seattle underscores how localized this housing cycle has become," he says. "In markets where inventory has rebuilt more quickly, new construction continues to offer an increasingly competitive alternative, showing buyers of newly built homes can save an average of $25,000 in ownership costs over the first decade compared to older existing stock."

With mortgage rates hovering near 6.5% for six consecutive weeks, pushed higher by renewed inflation concerns and elevated energy prices, Smith expects price growth to hold in supply-constrained markets, even as the national picture continues to cool.

The Case-Shiller Index reports on a two-month delay and reflects a three-month moving average of home sales prices.

Homes usually go under contract a month or two before they close, so the March report primarily reflects purchase decisions made in the winter months.

Although the Index's price data is delayed by several months, it is considered one of the best available measures of changing home values, because it is based on repeat transactions on the same properties.