• Mortgage rates are starting to decrease, but that hasn’t necessarily improved affordability
• In some locations it’s causing a spike in housing demand that’s outpacing supply.
• Listed below are the 9 cities where home prices are increasing the most, according to Redfin.

Homebuyers may have breathed a premature sigh of relief last month when mortgage rates dropped.

In the last six weeks, mortgage rates have fallen over half a percentage point to 6.2%, according to Freddie Mac. That’s the lowest level since February 2023. And there’s room for them to drop further as the Fed kicked off what is expected to be a series of rate cuts with a 50-basis-point reduction on Wednesday.

But it’s not necessarily good news for those looking to buy a home. Cheaper monthly payments have brought a flood of new buyers to the market — and now prices are rising in some areas as supply can’t keep up with demand, according to Redfin.

The firm analyzed the changes in home prices in the top 50 US metro areas and found that, across the country, year-over-year, home prices increased 6.7%, outpacing nationwide yearly growth of 4.2% in August 2023.

According to Redfin Senior Economist Sheharyar Bokhari, prices are increasing because the drop in mortgage rates has spurred demand for houses while supply remains low. The number of homes for sale is still almost 30% lower than before the pandemic despite rising 16.7% from a year ago.

This is just the beginning, though. Prospective homebuyers should get ready to see even more price hikes, Bokhari believes.

“If mortgage rates fall further this fall — and we expect they will— price growth will likely pick up as more prospective homebuyers come off the sidelines,” Bokhari said.

Economists have been warning about the housing market’s sensitivity to demand shocks. Skylar Olsen, Zillow’s chief economist, told Business Insider in an interview last month that lower mortgage rates would lead to homebuyers quickly buying up existing inventory and locking up the housing market again. Olsen believes that supply-side policies to build more cheap and accessible housing units need to be implemented before the housing market can return to a healthy state.

Top 9 cities where prices have risen the most

Home values are increasing faster in some cities than others, with 30 out of 50 of the most populous US metro areas seeing a rise in prices within the last month. Year-over-year, prices rose in almost every one of the top 50 metro areas. Only two cities — San Antonio and Austin — posted a drop in values.

Below are the 9 cities where home prices have risen the most in the last year, increasing at double-digit rates. Each city’s year-over-year and month-over-month price increases as of August 2024 are included.

1. Detroit, MI

One-year increase: 14.2%

One-month increase: 1.3%

2. Milwaukee, WI

One-year increase: 13.2%

One-month increase: 0.6%

3. Chicago, IL

One-year increase: 13.0%

One-month increase: 0.1%

4. Anaheim, CA

One-year increase: 12.0%

One-month increase: 0.4%

5. Nassau County, NY

One-year increase: 12.0%

One-month increase: -0.1%

6. New York, NY

One-year increase: 11.1%

One-month increase: 0.2%

7. Providence, RI

One-year increase: 10.8%

One-month increase: 1.2%

8. Miami, FL

One-year increase: 10.8%

One-month increase: 0.1%

9. Newark, NJ

One-year increase: 10.5%

One-month increase: 0.2%