Shaina Mishkin

Home prices kept growing at a healthy pace through the end of 2024, data due Tuesday is expected to show. Shifting tides in the housing market mean that growth could peter out this year.

Prices in 20 of the nation's large cities likely increased 4.4% in December from the year prior, according to FactSet consensus estimates for S&P CoreLogic Case-Shiller home price index data expected Tuesday. The release lags behind private indicators of home price growth, but is closely watched because it is designed to eliminate the impact from changes in the types of homes sold.

Such a gain would be about on par with the historic norm. Before the Covid-19 pandemic, home prices on average rose about 4% from the year prior, according to nearly two decades of historic data. But the past several years have been anything but normal.

First, ultralow mortgage rates in the years immediately following the pandemic helped ignite a home buying boom, which sent prices climbing rapidly upward at an unprecedented pace. Quickly rising mortgage rates led to a brief and shallow price correction in early 2023 and caused many would-be sellers to hang onto their homes instead of sell. That, in turn, helped send prices back up by reducing supply.

Those dynamics are changing yet again, with implications for home price growth. Active listings measured by Realtor.com last month were 25% higher than one year prior, with the most homes listed for sale of any January since 2020. ( News Corp, which owns Barron's, also owns Realtor.com operator Move.)

An increase in homes for sale led Zillow to reduce its home value forecast for 2025 in February. The website expects its measure to increase 0.9% this year, down from a prior forecast calling for a 2.9% rise. ""New listings were higher than expected out of the gate this year, and inventory expectations that were revised higher have put downward pressure on Zillow's forecast for home value growth," the company's research team wrote in the February report.

Zillow isn't the only forecaster calling for slower growth. The Mortgage Bankers Association foresees home prices tracked by FHFA house price index, a separate measure, rising just 1.3% in 2025. And Fannie Mae expects its measure of home prices to increase 3.5% by the end of 2025, a slower pace than the 5.8% growth it logged in 2024.

Of course, as the oft-cited real estate saying goes, all real estate is local. Home prices are likely to rise more quickly in places with few listings and relatively affordable home prices, and will be weakest in places with the most inventory and already-high prices.

The hot spots are largely in the northeast and Midwest, says Realtor.com senior economic research analyst Hannah Jones. "Some of these hotter markets are seeing prices continue to climb faster than is typical nationally," says Jones.

Prices measured by Case-Shiller in November grew most quickly in New York, rising 7.3% from the year prior. Chicago, and Washington, D.C. weren't far behind, with gains of 6.2% and 5.9%, respectively.

The same can't be said in some of the Sunbelt and western locales that boomed during the pandemic, adds Jones. "The cooler markets have seen prices decline or price growth really stall out." Of the 20 cities tracked by Case-Shiller, prices in November fell below year-ago levels only in Tampa, Fla. Dallas and Denver logged the slowest increases, with prices up just under 1% in both.

It all comes down to local supply and demand. "In these markets that are seeing really high competition and low inventory levels, that means that buyers are continuing to compete for homes," she says. "That kind of dynamic that was really common in the Sunbelt during the pandemic is now happening in these more affordable markets."

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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February 24, 2025 16:41 ET (21:41 GMT)

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