US home price growth cooled in June for third straight month
Housing price increases decelerated in June but increases remain strong
SitusAMC managing director Tim Rood reacts to Zillow forecasting a housing slowdown on 'Cavuto: Coast to Coast.'
Home price increases slowed in June for the third consecutive month, evidence that rising mortgage rates are starting to slow activity in the housing market.
Prices climbed 18.6% nationally in June from the previous year, down slightly from the gain of 19.7% recorded in May, the S&P CoreLogic Case-Shiller index showed on Tuesday.
"The deceleration in U.S. housing prices that we began to observe several months ago continued in June," Craig Lazzara, a managing director at S&P Dow Jones Indices, said. "Relative to May’s 19.9% gain, prices are clearly increasing at a slower rate."
The Case-Shiller index reports with a two-month delay, meaning it may not capture the latest slowdown in the market. A separate report from the National Association of Realtors last week showed that the national median home price moderated slightly in July, falling from a record high to $403,800. That is still up 10.8% from the previous year when the median cost of a home was $364,600.
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A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022. (Photo by FREDERIC J. BROWN/AFP via Getty Images / Getty Images)
Home prices increased the most in Tampa, Florida, with a 35% gain. Miami followed with an increase of 33%, while Dallas trailed at 28.2%.
The housing market has started to cool as the Federal Reserve hikes interest rates at the fastest pace in decades in order to bring scorching-hot inflation under control. Policymakers already approved two consecutive 75-basis point rate increases in June and July and confirmed that another super-sized hike is on the table in September.
Following the rate hikes, the average rate on a 30-year fixed mortgage – the most popular among new homeowners – climbed to nearly 6% in June, though they have since moderated. The average rate for a 30-year fixed rate mortgage hovered around 5.13% for the week ending Aug. 18, according to recent data from mortgage lender Freddie Mac.
That is significantly higher than just one year ago, when rates stood at 2.86%.
Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market. A new report from Redfin last week showed that home sale cancellations soared in July to another two-year high as buyers retreated from the market. About 63,000 home purchase agreements were called off in July, equal to 16% of homes that went into contract that month.
Houses in the Harris Ranch community of Boise, Idaho, on Friday, July 1, 2022. The housing market slowdown is having ripple effects across the industry and mortgage lenders are forecasting a slump in business. (Jeremy Erickson/Bloomberg via Getty Images / Getty Images)
"With home prices at new highs, inflation giving many workers an effective pay cut, and mortgage rates 250 basis points above last year’s levels, buyers are finding themselves hard-up against an affordability ceiling," said George Ratiu, senior economic and manager of economic research at Realtor.com.
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He added, "Compared to trends we saw during the pandemic, when home shoppers’ fear of missing out on record-low mortgage rates fueled a feverish search for a safe haven, today’s housing market is experiencing a hangover of sorts."