US home prices slow in August, index shows

US home prices continued to gain ground in August, but the pace of growth slowed considerably as rising mortgage rates pushed more potential buyers out of the market.

Home prices rose 13% in August from a year earlier, a smaller jump than the 15.6% growth seen in July and the 18.1% pace in June, according to the National Housing Price Index. S&P CoreLogic Case-Shiller Homes.

The July-August drop was the biggest slowdown in the index’s history since 1987, surpassing the previous record a month earlier.

July also marked the first monthly decline in the national index since February 2012, which continued into August, with seasonally adjusted prices retreating 0.9% from the previous month.

“These data clearly show that the rate of house price growth peaked in the spring of 2022 and has been declining ever since,” said Craig J. Lazzara, managing director of S&P Dow Jones Indices.

All 20 cities monitored by the index reported smaller price increases in August compared with a year earlier. But despite the ongoing slowdown, housing prices in August remain well above last year’s levels in all 20 cities.

Miami recorded the biggest gains, with home prices up 28.6% in August from a year earlier. Tampa followed, up 28%, and Charlotte, up 21.3%. However, the pace of price appreciation is also slowing in these cities.

Price growth was stronger in the Southeast, up 24.5% over the previous year, and in the South, up 23.6%.

But annual price growth is expected to continue to decline and some areas may start to see year-on-year declines.

“As the Federal Reserve raises interest rates, mortgage financing becomes more expensive and housing becomes less affordable,” Lazzara said. “House prices may continue to decelerate.”

Month on month, all 20 cities saw prices fall in August compared to July, with the biggest drops occurring in the west. San Francisco home prices were down 4.3% in August from the previous month, followed by Seattle (down 3.9%) and San Diego (down 2.8%).

A separate report from the Federal Housing Finance Agency also released on Tuesday showed a similar trajectory in home prices in August.

The FHFA House Price Index, which measures changes in the values ​​of single-family homes, reported that home prices rose 11.9% in August from a year earlier and were down 0.7% from a month earlier.

In July, the index showed the first monthly drop in home prices since May 2020, the agency said. The August drop marked the first time since March 2011 that the index has recorded two consecutive months of decline.

“Higher mortgage rates continued to put pressure on demand, notably weakening home price growth.” said Will Doerner, supervising economist in the research and statistics division at the FHFA.

The average rate for a 30-year fixed rate mortgage is currently 6.94%, double what it was at the start of the year. But affordability has worsened since August, when rates were a notch lower.

The fall in home price appreciation in August captures the late-summer slowdown in home-buying activity, said George Ratiu, senior economist and manager of economic research at Realtor.com.

“For homebuyers, the impact of higher rates was compounded by inflation reaching a four-decade high, resulting in less money in their pockets and reduced budgets,” Ratiu said. “The sharp pullback in demand was reflected in falling sales and slowing home prices.”

Since August, other indicators show that the housing market is cooling. With mortgage rates rising to nearly 7% — a level not seen in 20 years — home sales have tumbled and builders have pulled back on new home construction.

“With monthly mortgage payments 75% higher than last year, many first-time buyers are stuck in real estate markets, unable to find homes on budgets that have lost $100,000 in purchasing power this year,” Ratiu said.

Source: CNN Brasil

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