Home prices rose 3.9% in December, but spring should be less competitive

San Francisco, the lowest-performing major market since 2020, saw prices drop by 4.5% during the last six months of 2024. Seattle followed with a 3% decline. Other cities that exploded during the COVID-19 pandemic, like San Diego and Tampa, saw cooldowns of 2.9% and 2.7%, respectively.

New York City continued to demonstrate strength in home prices, up 7.2% year over year in December. Home prices reached an all-time high in Boston after a 6.6% annual gain, according to the Case-Shiller Index.

The index includes sales of properties that went under contract in October, so it doesn’t quite capture what’s currently happening in the housing market.

“While home prices are still rising, the index lags current housing market conditions,” Lisa Sturtevant, chief economist for Bright MLS, said in a statement. “It is expected that we will see slower price growth in early 2025 as inventory increases and affordability continues to be a constraint.”
She noted that the wildfires in Los Angeles have already driven rents higher, and home prices will be pushed up in the surrounding areas as displaced homeowners search for new homes. 

The Washington, D.C., metro area, which saw home prices rise 5.6% for the year ending in December, has also been disproportionately impacted by job cuts and return-to-the-office mandates.

“Although it is still too early to tell the extent to which layoffs will impact the region’s housing market, Bright MLS’ weekly market tracker shows signs of a bump in new listing activity in the Washington D.C. area at the end of February,” Sturtevant noted.

Zillow economists said that homebuyers should see cooler price appreciation and a less competitive environment this spring.

“Mortgage rates nearing 7% in January seem to have affected buyers more than sellers,” Zillow senior economist Kara Ng said. “January data from Zillow shows new listings from sellers are up nearly 12% compared to last year, but affordability-challenged buyers have been slower to return.

“As a result, for-sale inventory is building, at 18% higher than last January. While competition varies by region, many buyers can anticipate price reductions on their saved listings, as nearly a quarter of listings experienced price cuts in January.”