September saw home prices fall again due to rising mortgage rates and a decrease in demand.
The September S&P CoreLogic Case-Shiller Index showed that prices fell 1% in September compared to August. This was the third consecutive monthly drop. The index rose 10.6% in September compared to a 12.9% monthly rate.
Craig Lazzara (managing director, S&P Dow Jone Indices), stated in a statement that “As interest rates rise, mortgage financing will continue to be more expensive, and housing becomes less affordable,”. Home prices could well continue to fall due to the continued prospects of a difficult macroeconomic environment.
In September, the 10-city composite grew 9.7% annually, from 12.1% in August. The 20-city composite grew 10.4% in September after a 13.1% gain the month before. All 20 cities saw a slowing in price growth.
The Case-Shiller index reports after a delay of two months, which means it might not capture any market slowdowns.
Prices are still higher than they were one year ago, even though homeownership is no longer affordable due to higher interest rates.
According to a separate report by the National Association of Realtors, the median new house price increased nearly 15.4% in October compared to the previous year to $493,000. This is also more than 8 percent higher than in September.
Federal Reserve’s aggressive campaign of tightening policy and slowing the economy has been primarily felt in the interest rate-sensitive housing sector. As they attempt to curb inflation, which is nearing a 40-year high, policymakers have already raised the benchmark federal funds rates five times in succession.
According to data from mortgage lender Freddie Mac, the average rate for a 30-year fixed mortgage was 6.58% in the week ending Nov. 23. Although this is a decrease from the September peak of 7%, it is still higher than the 3.10% rate a year ago.
Due to high home prices and the rapid rise of borrowing costs, many homebuyers at entry level have been priced out of the market.