The housing market’s sharp increase in prices was always going to slow. The question was when. The answer is at the end of last year or the beginning of this one. Mostly, this was caused by a sharp rise in interest rates. Because of a jump from 3% to 6% rates, some metros have begun to have sharp price reversals. This is most notable in San Francisco, one of the most expensive markets in America. (Here are 20 cities where the middle class cannot afford housing.)
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The most carefully watched of the home prices research reports is the S&P Case-Shiller home price index. In January, for the sixth straight month, home price growth decelerated. In some cases, prices dropped from December, which also was outside the growth pattern of the past three years.

In specific, prices rose only 3.8% year over year in January. Early last year, that number was closer to 20%. Month over month, prices dropped 0.5%. Craig J. Lazzara, managing director at S&P DJI, commented, “2023 began as 2022 had ended, with U.S. home prices falling for the seventh consecutive month.” He added, “January’s market weakness was broadly based.” Prices dropped in 19 of the 20 cities the research measures.

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Across the 20 cities, some continue to have price increases year over year. This was particularly true in Florida, where prices rose 13.8% in Miami and 10.5% in Tampa.

The West Coast is where prices were hit hard. Year over year, they dropped 0.5% in Florida, 1.4% in San Diego, 5.1% in Seattle and 10.5% in San Francisco. Measurements Case-Shiller has taken since 2000 show housing prices in these cities are among the most expensive in America.

What happens next? If interest rates stay high, prices in other markets will start to follow San Francisco down.

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