We’ve been seeing signs of a housing market pullback, but it’s now official that home price growth is slamming on the brakes. The S&P CoreLogic Case-Shiller home price data is considered the gold standard for home prices, and the July numbers are now showing the first month-over-month decline since 2012.

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National Home Price Index

The report, released on September 27th, shows that national home prices were down .2%, for an annual rate of 15.8%. In June, the annual rate was 18.1%. CoreLogic says the difference between those two months is the steepest decline in the history of the index. (1)

Managing Director at the S&P Dow Jones Indices, Craig Lazarra, says the slide in pricing “reflects a forceful deceleration.” He says: “As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate.” (2)

20-City Home Price Index

The 20-City Home Price Index shows a bigger slowdown in price growth. The month-over-month reading was down .4% for an annual rate of 16.1% in July. It was 18.7% in June.

Annual price growth is still quite high in some metros. Tampa is at the top of that list with the largest year-over-year gains of 31.8% in July. Miami was second with 31.7%. Dallas follows with 24.7%.

Home Prices Decline as Mortgage Rates Rise

Home prices have been declining as mortgage rates rise. Home loans are currently around the 7% level, after a long period of very low rates. That’s happening in conjunction with the Federal Reserve’s effort to bring inflation back down to 2%. Although the Fed’s actions are not directly connected to mortgage rates, they do influence them.

Many homebuyers can’t afford to pay the high cost of a mortgage along with a high-priced home, so that’s taking some of the sizzle out of home sales, and home price growth. A lack of inventory is still putting pressure on home prices however, but the momentum of that upward trajectory is slowing down.

Other Home Price Reports

A separate report from the Federal Housing Finance Agency also shows a similar drop in home prices. It says that prices were down .6% in July compared to June, and that June only produced a .1% gain in home prices. Year-over-year, the FHFA index was up 13.9%.

John Burns Real Estate Consulting also tracks home prices in 148 markets. According to that data, 98 of those markets have seen a drop in home values from a peak earlier this year. Eleven of the markets show a decline of more than 5%. (3)

Zillow also reports that home values have fallen in 89 of the 150 largest U.S. markets. And in ten of those markets, values have fallen more than 5%.

Metros seeing the biggest price declines are the high-cost tech hubs and frothy work-from-home destinations. Among the high-cost tech hubs with the biggest price declines are San Jose, San Francisco, and Seattle. The work-from-home metros with the biggest price declines include Austin, Boise, and Phoenix.

Real estate analysts say the new data is showing them that the expected home price correction is more pronounced and more widespread than they previously expected.

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Thank you! And thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.corelogic.com/intelligence/reports/us-corelogic-sp-case-shiller-index-takes-another-step-back-in-july-up-15-8-versus-18-1-in-june/

2 - https://www.cnn.com/2022/09/27/homes/case-shiller-july-2022

3 - https://fortune.com/2022/09/28/housing-market-home-price-correction-2022/