Home prices cooled at the fastest rate in index history

A ‘for sale’ sign is displayed outside a single family home on September 22, 2022 in Los Angeles, California.

Dinner Allison | Getty Images

Home prices in the United States fell in July at the fastest rate in the history of the S&P CoreLogic Case-Shiller index, according to a new report released on Tuesday.

Home prices in July were still higher than they were a year ago, but have cooled considerably from June’s gains. Prices nationwide rose 15.8% from July 2021, well below the 18.1% gain the previous month, according to the report.

The 10-city composite rose 14.9% year-over-year, from 17.4% in June. The composite of the 20 cities gained 16.1%, compared to 18.7% the previous month. July’s year-over-year gains were lower than June’s in each of the cities covered by the index.

“The July report reflects a sharp deceleration,” S&P DJI chief executive Craig J. Lazzara wrote in a statement, noting the difference in annual gains in June and July. “The -2.3% difference between these two monthly gain rates is the largest deceleration in the history of the index.”

Tampa, Miami and Dallas posted the highest annual gains among the 20 cities in July, with increases of 31.8%, 31.7% and 24.7%, respectively. Washington, DC, Minneapolis and San Francisco posted the weakest gains, but were still well above levels from a year ago.

Another report from the National Association of Realtors showed home prices fell significantly from June to July. Prices generally fall during this period, due to the strong seasonality of the housing market, but the drop was three times the historical average drop.

The share of homes with price cuts hit about 20% in August, similar to 2017, according to Realtor.com.

“For homeowners considering listing, the market today is very different than it was 3 weeks ago,” said George Ratiu, senior economist and head of economic research for Realtor.com.

Home prices are falling because affordability has weakened significantly due to rapidly rising mortgage rates. The average rate for the popular 30-year fixed-rate mortgage started this year around 3%, but by June it had briefly topped 6%. It remained in the high 5% range throughout July and is now approaching 7%, making the average monthly payment about 70% higher than it was a year ago.

“As the Federal Reserve continues to push interest rates higher, mortgage financing has become more expensive, a process that continues to this day. Given the outlook for a more challenging macroeconomic environment, house prices could well keep slowing down,” Lazzara said.

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