The increase in U.S. home prices shows no signs of slowing down, but the scale and rate of housing cost increases can vary significantly from place to place. How and why prices rise underscores major differences in how the cost of living changes in different areas.
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Those who study this rely on the S&P Case-Shiller Index, a report that monitors home prices in 20 major U.S. metropolitan areas. Data in the index sheds light on cities at both extremes — those where prices climb the most and those where they barely rise.
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Rising Home Prices: An Overview
The Case-Shiller Index determines prices based on an index score of 100, assigned to each of the 20 cities covered by these monthly reports when monitoring first started in January 2000.
In places where housing prices have seen steep increases, that index score has risen to 300 or higher over the past two decades plus. Over the same period, other cities saw less significant index score increases to 200 or lower. Though living costs tend to closely follow housing costs, this isn’t always the case.
Home prices in the U.S. have steadily risen over the last 14 consecutive months, climbing 5% higher compared to the same period last year. One factor behind this trend is low inventory levels, which means housing is in short supply in some areas. A limited housing market means homebuyers have to spend more to compete, resulting in a trend of higher prices.
Part of the shortfall in available homes is due to homeowners with favorable mortgage rates. With high rates on new mortgages, savvy homeowners with lower fixed rates on their current homes are left with little incentive to sell.
As a result, many homeowners who benefit from 30-year fixed mortgages with rates under 3% are hanging on to properties they might otherwise have put on the market.
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The Most Expensive Housing Market: San Diego
Home prices have increased more in San Diego than anywhere else in the country, with a Case-Shiller Index score of 446.55 as of July.
Factors Behind San Diego’s Price Surge
San Diego has experienced rapid urban growth, which is reflected in its housing market. With over 1 million people now calling the southern California city home, the influx of new San Diegans has resulted in a rise in home prices so significant it outpaces any other region in the country.