Annual home price growth slowed in November for the fifth consecutive month. And prices are likely to continue softening, according to the latest S&P CoreLogic Case-Shiller Indices report.
Home prices across the U.S. increased by 7.7% annually in November, down from the 9.2% annual increase in October, Case-Shiller's National Home Price NSA index showed. Home prices have fallen by 3.6% since the market peaked in June 2022.
"November 2022 marked the fifth consecutive month of declining home prices in the U.S.," Craig Lazzara, S&P Dow Jones Indices managing director, said. "As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices. Economic weakness, including the possibility of a recession, would also constrain potential buyers.
"Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken," Lazzara continued.
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On a monthly basis, home prices fell across the nation in November, according to the report. The national home price index dropped 0.6% month-over-month and the 10-city and 20-city composites fell by 0.7% and 0.8%, respectively. Both are 5% below where prices were in June.
"These declines, of course, came after very strong price increases in late 2021 and the first half of 2022," Lazzara said. "Despite its recent weakness, on a year-over-year basis, the National Composite gained 7.7%, which is in the 74th percentile of historical performance levels."
The city with the highest price gain was Miami, where home prices rose 18.4% annually. This was followed by Tampa and Atlanta, which posted increases of 16.9% and 12.7%, respectively.
Prices in San Francisco were down 1.6%, the most significant annual decline posted by the city in a decade, according to the report.
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After starting the year with an increase, mortgage rates steadily declined throughout January and into February, creating tangible savings for some homebuyers.
There is a growing sense that inflation has cooled, as the Consumer Price Index, a measure if inflation posted consecutive months of improvement. That has pushed the Federal Reserve's to ease its interest rate increases, which in turn has helped bring mortgage rates down to nearly 6%, according to Freddie Mac.
At that level, buyers with a $22,500 budget can afford to spend roughly $35,000 more on a $400,000 home purchase than they could have when rates peaked at over 7% in November, according to Redfin.
"We expect more homebuyers and sellers to gradually return to the market by springtime, but mixed economic news and mixed reactions from the market mean the recovery will be uneven," Redfin economics research lead Chen Zhao said. "The Fed hiked rates at a slower pace than last year, which means mortgage rates are unlikely to rise further. But it also signaled ongoing rate increases to fight inflation, which will likely prevent the steep mortgage-rate decline that some optimistic buyers have been waiting for."
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