The recent deceleration in the housing market is likely not fully reflected in the data.
Home prices slowed in June, even as mortgage rates trended higher, according to the monthly report from S&P CoreLogic Case-Shiller released Tuesday.
The organization’s monthly price index showed a year over year gain of 18%, down from the 19.9% pace seen in May. But since the report covers sales that probably originated in May, it may not yet reflect the full slowdown underway in the housing market.
Tampa, Florida, led the way among the 20 cities surveyed for the national index, with a 35% gain, while Miami followed at 33% and Dallas at 28.2%.
“The deceleration in U.S. housing prices that we began to observe several months ago continued in June 2022, as the National Composite Index rose by 18.0% on a year-over-year basis. Relative to May’s 19.9% gain (and April’s 20.6%), prices are clearly increasing at a slower rate,” said Craig J. Lazzara, managing director at S&P DJI.
“We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that continued as our June data were gathered,” he added. “As the macroeconomic environment continues to be challenging, home prices may well continue to decelerate.”
Home sales, both new and existing, have come under pressure since June as a slowing economy, interest rate hikes from the Federal Reserve and continued affordability woes affect the once-hot housing sector.
“Today’s S&P CoreLogic Case Shiller Index spotlights a housing market that is losing steam as it moves through the peak summer months,” George Ratiu, senior economist and manager of economic research at Realtor.com, said. “With home prices at new highs, inflation giving many workers an effective pay cut, and mortgage rates 250 basis points above last year’s levels, buyers are finding themselves hard-up against an affordability ceiling.”
“Compared to trends we saw during the pandemic, when home shoppers’ fear of missing out on record-low mortgage rates fueled a feverish search for a safe haven, today’s housing market is experiencing a hangover of sorts,” he added.
A cooling of the housing and labor markets is a goal of the Fed as it seeks to bring inflation – now running at more than 8% annually – back down to its stated goal of a 2% annual range. But Fed Chairman Jerome Powell acknowledged last week that would bring some “pain” to consumers and businesses alike.
Some analysts point out that the most recent data, for June, reflects sales that likely began in May when the sector was still experiencing strong sales and may not reflect conditions as the summer turns into fall.
“Inventory is expanding, homes are remaining on the market longer, and buyers are starting to have more leverage, including on price,” said Lisa Sturtevant, Bright MLS chief economist.
“With mortgage rates higher, prospective buyers are hitting affordability ceilings and the days of multiple offers, tens of thousands of dollars over asking price are over,” she added. “Overall home prices will continue to rise, but the pace of home price growth will continue to decelerate to more typical year-over-year price appreciation of between 2% and 4%.”