Former homebuyer hotspots in the U.S. saw home prices fall in January as the market corrects.
The S&P CoreLogic Case-Shiller National Home Price NSA Index saw home prices decelerate for another month, posting a 3.8% annual gain in January, down from 5.6% in the previous month.
Craig J. Lazzara, Managing Director at S&P DJI, said the data marked the seventh straight month of YOY decreases.
West Coast hubs that saw huge migration during the pandemic saw their gains go negative YOY in January. The West overall saw prices decline by 1.5%. San Francisco clocked in a 7.6% drop YOY, the biggest by far, followed by Seattle with a 5.1% decrease.
Southern cities continued to see gains, with Miami, Tampa, and Atlanta all recording increases near or over 10% despite the cooldown in other metros.
Month-over-month prices fell in most of the twenty cities analyzed with only Miami, Boston, Charlotte, and Cleveland seeing increases after seasonal adjustment.
Lazarra noted that January declines weren’t as stunning as those in December, however.
“January’s market weakness was broadly based. Before seasonal adjustment, 19 cities registered a decline; the seasonally adjusted picture is a bit brighter, with only 15 cities declining. With or without seasonal adjustment, most cities’ January declines were less severe than their December counterparts,” he said.
According to the latest Federal Housing Finance Agency House Price Index, house prices were up 5.3% YOY and 0.2% from December.
“Many of the January closings, on which this month’s HPI is constructed, reflect rate locks after mortgage rates declined from their peak in early November,” said Dr. Nataliya Polkovnichenko, Supervisory Economist, in FHFA’s Division of Research and Statistics.
Rates were volatile at the end of December, but have been declining in the wake of Silicon Valley Bank’s collapse. How long rates will continue to retreat is unclear.
“Financial news this month has been dominated by ructions in the commercial banking industry, as some institutions’ risk management functions proved unequal to the rising level of interest rates,” Lazarra noted.
“Despite this, the Federal Reserve remains focused on its inflation-reduction targets, which suggest that rates may remain elevated in the near term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”
Investors are keeping a close eye on housing prices as a possible indicator of a housing market crash.
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