For the seventh month in a row, average prices for existing homes in the U.S. are up, peaking at $311,500 in August, with seven cities hitting their highest point ever. Of course, not every market in the country is experiencing those record highs, and, with interest rates rising, others may plateau soon, but Midwestern homeowners are seeing a major gain.
That’s according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, a leading measure of home values for over 30 years, which finds that average existing home prices are up nationwide by nearly 6% year to date and 2.6% year over year, “well above the median full calendar year increase” in more than three decades of data. But the gains weren’t uniform across the country. The Rust Belt is shining particularly bright, with Chicago and Detroit clocking annual increases nearly double the national average.
“Regional differences are substantial,” Craig J. Lazzara, managing director at S&P DJI, said in a statement. Chicago, New York, and Detroit saw the largest year-over-year basis percentage increase, with the Windy City securing the highest year-over-year increase among the index’s 20-city composite for the fourth month in a row at a 5% gain. On the other end of the spectrum, Las Vegas was down nearly 5%, while average prices in Phoenix declined nearly 4%.
The Case-Shiller index measures the change in value of U.S. single-family homes month to month, and was developed in the 1980s by two heavily garlanded economists, Karl Case and Robert Shiller, a Nobel winner. It illustrates existing home price changes several different ways, looking at national home prices as well as a 10-city and 20-city composite.
Though the data lags a few months behind the current market—this month’s tracks June, July and August—it is one of the oldest and most respected housing indices. It’s a useful economic indicator because strong housing sales can signal optimism in the broader economy (why else make such a big purchase?) or the opposite. As it did this month, it can also show how different regions in the country are faring.
As the headline Case-Shiller figure indicates, home prices as a whole remain at record highs across the country. But not all is well with the U.S. housing market. When those prices are coupled with rising mortgage rates that hit 8% this fall, housing affordability is the worst it’s been in decades. (The index does not even include new home sale prices, which are considerably higher than existing home prices at more than $418,000, according to the U.S. Census Bureau, meaning affordability on the whole is even more strained.) Home sales are at their lowest level in 13 years, and some experts expect appreciation to begin to plateau.
Here’s what that means for different markets around the country.
The Midwest heats up
Prices in the Midwest were especially strong in August, continuing a months-long ascension of the Rust Belt to the top of the most desirable housing markets. Chicago prices were up 5% year over year, while Detroit was right on its heels, up 4.8%. Both markets reached record-high prices, at $197,000 and $180,800, respectively.
If those all-time highs look less than impressive, well, that’s exactly why the Midwest is so popular, Ed Pinto, director of the American Enterprise Institute’s Housing Center, previously told Fortune‘s Shawn Tully. In a housing market plagued by unaffordability, Chicago, Detroit, and other central-U.S. cities offer buyers some breathing room. That is sending the average price up now, though the region is still the best deal around.
“Believe it or not, cities like Cleveland, Columbus, and Pittsburgh have more going for them in the near future than a Las Vegas or Phoenix,” Pinto said. “That’s precisely because they’re still relatively affordable, while the price explosion in the Southern tier, at today’s surging interest rates, created a huge barrier for most potential buyers.”
Another reason Pinto pointed out: low inventory. Though that’s a problem everywhere, the Midwest has particularly slim pickings. Nationwide, all homes on the market today will be sold in 3.1 months on average, he says. But in Pittsburgh and Grand Rapids, for example, the supply sits at just 2.6 and 2.0 months, respectively. That’s helping to drive prices up.
“While the level of demand for homes has decreased in the face of rising interest rates and overall affordability challenges, significantly lower numbers of new listings entering the market has kept months of inventory for quality homes at lower levels,” Budge Huskey, president and CEO of Premier Sotheby’s International Realty, tells Fortune. That is…
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