US home prices slowed in August at the fastest pace on record
Prices may continue to decelerate as Fed raises interest rates higher
Macro Trends Advisors founding partner Mitch Roschelle argues the housing market is slowing down 'dramatically.'
Home price increases in August slowed at the fastest pace on record as rapidly rising mortgage rates drained demand from the housing market.
Prices climbed 13.0% nationally in August from the previous year, down from 15.6% in July, the S&P CoreLogic Case-Shiller index showed on Tuesday. That’s the biggest deceleration in the index’s history.
"The forceful deceleration in U.S. housing prices that we noted a month ago continued in our report for August 2022," Craig Lazzara, Managing Director at S&P Dow Jone Indices, said in a statement. "Price gains decelerated in every one of our 20 cities. These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since."
The 10-City composite, meanwhile, climbed 12.1% annually, down from 14.9% in June, and the 20-City composite rose 13.1%, down from 16.0% the previous month.
INFLATION SURGED MORE THAN EXPECTED IN SEPTEMBER AS PRICES REMAIN PAINFULLY HIGH
For Sale sign in front of a property in Monterey Park, Calif., Aug. 16, 2022. (Photo by FREDERIC J. BROWN/AFP via Getty Images / Getty Images)
Home prices increased the most in Miami, with a 28.6% gain. Tampa, Florida followed with an increase of 28.0%. Charlotte, North Carolina was third at 21.3%.
The Case-Shiller index reports with a two-month delay, meaning it may not capture the latest slowdown in the market.
Even with higher interest rates putting homeownership out of reach for millions of Americans, prices are still steeper than just one year ago.
FED BARRELS TOWARD ANOTHER 75 BASIS POINT RATE HIKE AS HIGH INFLATION PERSISTS
A separate report from the National Association of Realtors last week showed that the national median price of an existing home sold in September was $384,8000, an 8.4% increase from the same time a year ago. This marks the 127th consecutive month of year-over-year home price increases, the longest-running streak on record.
However, prices did decline slightly from the high of $413,800 recorded in June, part of a usual trend of prices declining after peaking in the early summer.
Houses in the Harris Ranch community of Boise, Idaho, Fri., 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)
The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten policy and slow the economy. Policymakers already lifted the benchmark federal funds rate five consecutive times – including three 75-basis-point increases in June, July and September – and have shown no sign of slowing down as they try to crush inflation that is still running near a 40-year high.
The average rate for a 30-year fixed mortgage climbed to 6.94% for the week ended Oct. 20, according to the latest data released Thursday from mortgage lender Freddie Mac. That is more than double just one year ago, when rates stood at 3.09%.
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Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market.