Home Prices Start to Slip as Mortgage Rates Soar

Home Prices Start to Slip as Mortgage Rates Soar: It would look as though the housing market is gradually beginning to experience a shift in the direction of more favourable conditions.

The S&P CoreLogic Case-Shiller Home Price Index experienced its largest month-to-month loss since November 2014, falling 0.3% in July compared to the previous month of June.

Although there was an increase in prices of 15.8% from the beginning of the year to the end of July, this represents a decrease from the 18.1% increase that occurred from the beginning of the year until the end of June. The difference of 2.3 percentage points represents the most significant slowdown in the history of the indicator, which dates all the way back to the 1980s.

According to Craig Lazzara, managing director at S&P DJI, who was quoted in a news release, “while U.S. house prices remain well above their year-ago levels, July’s data demonstrates a dramatic downturn,” the deceleration is reflected in the report.

Mortgage borrowing has gotten more expensive, and this trend is expected to continue for the foreseeable future as long as the Federal Reserve maintains its current course of raising interest rates.

This year, mortgage rates have skyrocketed, which may be reducing the demand for property, which in turn is causing prices for homes to fall. The average interest rate for a 30-year fixed mortgage was 6.29% for the week that ended on September 22.

According to the real estate brokerage Redfin, purchasers who have a monthly budget of $3,000 are now in a position to afford a house that is $479,750 with mortgage rates of 6%. This is a decrease from a year ago, when mortgage rates were 3% and the purchasers had been capable of affording a house that was $621,000.

According to Lazarra’s statement, “given the expectations for a more adverse macroeconomic climate, it is possible that housing values may continue to slow.”

Sales of Brand-New Homes

In the meantime, sales of newly constructed single-family homes increased by 29% in August compared to the previous month, marking the largest year total since 2008. According to the information available from the relevant authorities, however, it was 0.1% lower than in August 2021.

There are a lot of similarities between the new house worth development and the Case-Shiller report. In August, the median transaction price of a brand-new home fell to $436,800 from $466,300 in July. This is a 6.3% decrease.

August’s selling costs showed a year-on-year increase of 8%, which was the first increase in the single digits since the middle of 2021. This increase was also a reduction from July’s 14.9% increase.

Rents, too, have started to go down, following in the footsteps of falling home prices.

According to data provided by Realtor.com, the median asking rent for residences ranging from zero to two bedrooms decreased by 0.6%, or $10, for the month of August, to reach $1,771. Since November, that has been the leading cause of the fall for the Top 50 cities.

According to what economists Jiayi Xu and Danielle Hale of Realtor.com noted, this “may be an indication that more regular seasonal cooling is returning to the rental market.” This is similar to what they’ve seen in recent statistics regarding the for-sale market.

Peak Rents?

However, this may also indicate that rents have reached their apex, as the Federal Reserve’s interest rate hikes are starting to make a difference in the economy. Moreover, this may indicate that rents have reached their apex.

To be clear, rents still increased by 9.8% over the course of the previous year through the month of August. However, that was the first occasion since July of 2021 that the increase was less than ten percent.

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