Home Price Deceleration Breaks July’s Record

Home price appreciation continued to cool in August though growth remained elevated from a year earlier, according to new data.

The S&P CoreLogic Case-Shiller National Home Price NSA Index saw home prices decelerate, posting a 13% annual gain in August, down from 15.6% in the previous month.

This is the largest monthly deceleration in the history of the index, pushing July’s record to second place.

Craig J. Lazzara, Managing Director at S&P DJI, called current trends a “forceful deceleration” of home prices.

“These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since,” he said.

“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable. Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”

The 10-City Composite reported a 12.1% increase YOY, down from 14.9% in July, while the 20-City Composite rose by 13.1% YOY, down from 16%.

All 20 cities reported lower YOY price increases in August than July, both before and after seasonal adjustments.

Miami (+28.6%) dethroned Tampa (+28%) for highest annual price gains.

Charlotte took out Dallas for third place with a 21.3% increase.

According to the latest Federal Housing Finance Agency House Price Index, house prices were up 11.9% YOY, but fell 0.7% month-over-month.

For the nine census divisions, seasonally adjusted monthly house price changes ranged from -2.0% in the Mountain division to +0.4% in the New England division. The report showed 12-month changes to be all positive, ranging from +7.4% in the Pacific division to +16.2% in the South Atlantic division.

“U.S. house prices declined in August at a similar pace to the previous month. This is the first time since March 2011 that the index has seen two consecutive months of decline,” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics.

Doerner said the recent monthly decline solidifies the deceleration of 12-month house price growth that began earlier this year.

“Higher mortgage rates continued to put pressure on demand, notably weakening house price growth,” Doerner said.

Mortgage rates averaged 6.94% last week, though the Mortgage Bankers Association expects them to fall to 5.4% by the end of 2023.

Housing starts dropped 8.1% in September, and builder confidence is now at its lowest level since August 2012, with the exception of the onset of the pandemic in the spring of 2020.

Jerry Konter, chairman of the National Association of Home Builders, called rising rates “unhealthy and unsustainable.”