Case-Shiller Home Price index rises 7 months in a row, 7 cities hit all-time highs

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 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 “leading to not only insulation of home values, but rather a return to appreciation.”

Elsewhere, Atlanta, Boston, Charlotte, Miami, and New York City also reached all-time highs in August, with Miami reporting the highest average home price of all of the individual markets at more than $422,000. Selma Hepp, CoreLogic’s chief economist, credits some of the appreciation in New York and Chicago to the ongoing return to cities and offices post-pandemic.

The West fizzles out

While the Midwest is heating up, markets that were particularly hot during the Pandemic Housing Boom are cooling off. Of the 20-city composite, western cities are seeing the largest drops in home prices year-over-year, with Las Vegas down 4.9% to $281,490, Phoenix down 3.9% to $322,50, and San Francisco down 2.5% to $349,830. Seattle, Portland, and Los Angeles also saw declines, although smaller ones than in July.

Reasons for the declines in value vary, but their red-hot price increases of recent years are partly to blame. Coupled with sky-high interest rates, buyers simply can’t afford to move there anymore.

And individual markets have their own issues. San Francisco still boasts some of the highest prices in the nation, but they’ve have come considerably since last summer. That’s because they were so high to begin with, partly because people have been moving out of the city with the rise of remote work, and partly because of rising interest rates affecting not just the housing market but the entire tech sector, among other reasons.

Cleveland, Dallas, Denver, Minneapolis, Portland, and Washington, D.C. all reported price decreases in August, albeit small. Each of these cities reported a month-over-month drop in average existing home prices of 0.5% or less. 

Housing affordability? In this economy?

Whether prices moved slightly on a month-over-month basis doesn’t give the full picture on what housing affordability looks like in the U.S. There are also mortgage rates to take into account, and a dollar goes further in certain markets than others. 

“When prices were high but interest rates were low, many buyers were still making it work,” Lindsey Harn, a real estate agent in Sereno, California, tells Fortune. “However, increased prices along with high rates mean higher property taxes and monthly payments, which means some people are now simply priced out of the market.”

Not only are buyers priced out of the market, but fewer people are willing to sell and risk losing a sub-3% interest rate for more than double. Home prices are likely to continue to rise—or at least remain historically high—as long as interest rates keep displacing new homeowners from the housing market.

However, higher prices indicate that we’re still in a sellers’ market.

“Sellers selling and buying in the same market will be faced with high prices,” says Harn. “However, for those looking to move to a more affordable area, now is a great time to maximize profits.”