Credit: jgroup, https://www.istockphoto.com/portfolio/jgroup?mediatype=photography
U.S. home prices are still going up but the upward movement is slowing.
The growth of home prices fell for a second straight month in August, showing a deceleration in housing market price gains since the onset of the covid pandemic that made homeownership unaffordable for an estimated 61 percent of renters.
Interest rates have risen to 20-year highs and the increased cost of borrowing money has slowed the demand for homes and helped decelerate home price increases at the fastest pace on record, Bloomberg reported.
Home prices increased 13 percent in August from a year earlier, down from a 15.6-percent increase in July, according to the S&P CoreLogic Case-Shiller index, which measures U.S. residential real estate prices. That’s the biggest deceleration in the index’s history.
The rate of year-over-year price increases has slowed since peaking at 21.2 percent in April.
While Federal Reserve interest rate hikes are helping to curb the hottest inflation in decades, home prices are still high compared to last year. Mortgage rates are approaching 7 percent and many would-be buyers are shut out of the market while some sellers are backing out.
Price gains have decelerated over the past year with 20 indexed cities gaining 13.1 percent in August, down from the 16 percent increase in July. Miami, Tampa and Charlotte saw the largest year-over-year gains, while the biggest price declines were on the West Coast, Marketwatch reported.
The biggest shifts are concentrated in the West, mainly in states that went wild during the pandemic housing frenzy: California, Arizona, Nevada, Colorado, Idaho and Utah, Deseret Times reported.
“Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate,” said Craig Lazzara, a managing director at S&P Dow Jones Indices.
The market shift in recent months has started cooling the pandemic boom, when home listings saw multiple offers and often went under contract within a week. Sales of existing homes fell for an eighth straight month in September, according to National Association of Realtors, and new home construction also dropped in September, according to recent government data.
“As we move into the colder months of the year, we can expect further declines in home sales and continued downward adjustment in prices,” said George Ratiu, manager of economic research at Realtor.com.
