While home prices remain higher than last year's, the gains are shrinking at a pace that’s the fastest on record, according to one metric. The impacts on housing primarily stem from dramatically higher interest rates.
In August, prices were 13% higher across the country compared to August 2021, based on data from the S&P CoreLogic Case-Shiller Home Price Index. That’s down from the previous month’s annual gain of 15.6%. The difference is 2.6% between those two metrics, which is the most significant gap in monthly comparisons in the index’s history. The index was launched in 1987.
To put it another way, price gains are declining at a record-setting pace.
There’s a 10-city composite used for the Case-Shiller Home Price Index, tracking the biggest housing markets in the U.S. Year-over-year, it went up 12.1% in August, compared to July’s gain of 14.9%.
There’s also a 20-city composite, including a more varied set of metro areas. That was up 13.1%, while it was 16% the month before.
Analysts described it as a “forceful deceleration in U.S. housing prices.” In all of the 20 cities looked at, price gains were cooling. According to this recent data, the growth of prices of housing peaked in the spring of this year and since then has been declining.
The areas that were leading gains in prices included Miami and Tampa in Florida, as well as Charlotte, North Carolina. They had increases year-over-year of 28.6%, 28%, and 21.3%. All 20 cities reported lower rises in prices in the year that ended in August compared to the one ending in July.
The West Coast, with some of the most expensive housing markets in the country, saw much of the steepest declines. San Francisco saw a decrease of 4.3%, Seattle was 3.9%, and San Diego was 2.8%.
There was a rapid jump in mortgage rates from record lows earlier in the year to rates that by June were beyond 6% and now are over 7%.
That means mortgage payments are as much as 75% higher than last year, so first-time buyers aren’t finding opportunities in housing markets. These buyers have lost around $100,000 in purchasing power just this year, according to a senior economist at Realtor.com. That economist also noted that high home prices and high interest rates prevent would-be sellers from putting their houses on the market—they’re staying locked into their lower rates.
The shifts in the market in recent months have been halting what many described as the pandemic boom, where houses were being snapped up rapidly. The sales of existing homes fell for the eighth straight month in September, according to the National Association of Realtors.
New construction also went down in September, according to data from the government.
Now, we’re moving into cold weather months, so there will likely continue to be downward price adjustments and more declines in home sales.
Homebuilders have been impacted by the sudden slowdown in the market, with spikes in canceled deals and plunging third-quarter orders, as demand has hit a speedbump.
