U.S home price growth slowed for the second consecutive month in August according to S&P Case-Shiller’s national home price index. National home price growth fell by -9.8 percent year-over-year as compared to July’s year-over-year reading of -5.3 percent. Home price growth slowed by -1.1 percent month-to-month from July to August.
Rising Mortgage Rates and Recession Worries Dampen Homebuyer Interest
The Mortgage Bankers Association forecasted a recession in 2023 and expects mortgage rates to fall to approximately 5.40 percent by the end of 2023. Mike Fratantini, senior vice president and chief economist at the MBA, said: “The upside of [a potential recession] for the industry is that it’s likely going to bring rates down a little bit.” Current rates for 30-year fixed-rate mortgages are near seven percent; the MBA expects 30-year fixed mortgage rates to fall to approximately 5.40 percent by the end of 2023.
Rising mortgage rates coupled with high home prices created affordability concerns and challenged would-be buyers in meeting mortgage approval requirements. Less demand for homes caused home price growth to slow nationwide.
S&P Case-Shiller 20-City Home Price Index: August Home Price Growth Slows in All Cities
Home price growth peaked in April with a national home price growth rate of 21.2 percent year-over-year, but slowed to a pace of 16.0 percent in July and 13.1 percent in August. The top three cities in the 20-City Index were Miami, Florida with 28.6 percent home price growth. Home prices rose by 28.0 percent in Tampa, Florida, and were 21.3 percent higher in Charlotte, North Carolina.
In related news, the Federal Housing Finance Agency released its House Price Index for August. Home prices for homes owned or financed by Fannie Mae and Freddie Mac fell by -0.7 percent in August. This was the first time since March 2011 that the FHFA HPI decreased for two consecutive months.
Inventories of newly-built homes were higher than normal at a 9.2 months supply. Real estate pros typically consider a six- months supply of homes for sale reflective of a balanced housing market. Rising materials costs caused home builders to raise home prices; the median home price of a new home in August was $470,600 and 13.90 percent higher year-over-year, but some builders are reducing prices and offering buyer incentives on new homes as sales falter.
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