Topline
Home prices, which have been shooting up since last year, grew at a slower pace in April, showing signs of a potential cool down in the red-hot housing market, according to new data from S&P Case-Shiller on Tuesday.
Home prices are up significantly from last year but could cool by later in 2022 thanks to higher … [+]
Key Facts
Home-price growth slowed in April, rising 20.4% compared to last year but down from a 20.6% growth rate in the previous month, according to the S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major cities.
For the first time in five months, most of the 20 cities in the index saw a monthly decline in price gains, while metropolitan areas in the South such as Atlanta, Charlotte, Dallas, Miami and Tampa saw the biggest increases since March.
The Case-Shiller index reports on a two-month delay and constitutes a three-month moving average of repeat-sales data: Since then, median existing-home prices spiked 15% in May, topping $400,000 for the first time on record, according to the National Association of Realtors.
What’s more, the average rate on the closely-followed 30-year fixed mortgage had just crossed 5% in April (up from 3% in January), but has since spiked past 6% in June.
Rising mortgage rates this year have made home-buying more expensive for many Americans, but demand to purchase homes continues to far outpace supply—with a limited inventory of houses for sale.
“We noted last month that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that had only just begun when April data were gathered,” said Craig Lazzara, managing director at S&P Dow Jones Indices, in a recent note.
Crucial Quote:
“April 2022 showed initial (although inconsistent) signs of a deceleration in the growth rate of U.S. home prices,” says Lazarra. He predicts that “a more challenging macroeconomic environment may not support extraordinary home price growth for much longer.”
Key Background:
Another key indicator of housing market activity—pending home sales—saw a surprise jump in May, reversing six straight months of declines as mortgage rates moderated somewhat last month. Experts warn that higher mortgage rates will continue to weigh on demand, however: With home sales and mortgage applications down significantly from last year, “the housing market is clearly undergoing a transition,” said Lawrence Yun, chief economist at the National Association of Realtors, earlier this week.
Further Reading:
Source: https://www.forbes.com/sites/sergeiklebnikov/2022/06/28/home-prices-finally-cooling-off-market-slows-in-april-but-demand-remains-high-despite-rising-mortgage-rates/