US home prices cool at fastest rate on record as pandemic boom ends

The pandemic-era boom in the US housing market appears to be coming to an end – with prices decelerating at their fastest annual pace on record in July, according to the latest S&P CoreLogic Case-Shiller Index data released Tuesday.

Home prices were still increasing year-over-year in July, but the rate of growth is falling fast. Prices at the national level rose by 15.8% for the 12 months ending in July, but the rate of increase was down from 18.1% increase in June.

The 2.3% decline in month-over-month growth was the largest deceleration on record for the S&P CoreLogic Case-Shiller Index.

“Although US housing prices remain substantially above their year-ago levels, July’s report reflects a forceful deceleration,” said Craig J. Lazzara, managing director at S&P DJI.  

The market has rapidly cooled in recent months as mortgage rates surge in response to the Federal Reserve’s interest rate hikes. As of last week, the average 30-year fixed-rate mortgage was 6.29%, up by a whopping 3.41% since the same week one year ago.

Home for sale
The housing market is cooling off from its red-hot pace during the COVID-19 pandemic.
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As The Post has reported, rising mortgage rates have further hampered affordability for prospective buyers who already faced the dual crunch of expensive pandemic-era home prices and decades-high inflation.

The Case-Shiller 10-City Composite index, which includes prices in major metro areas such as Boston, Miami and New York, reported an annual increase of 14.9% in July, down from 17.4% the previous month. The 20-year Composite index gained 16.1%, down from 18.7%.

On a monthly basis, home prices actually shrank from June to July. The seasonally-adjusted national index shrank by 0.2%, marking the first declined by that measure since early 2012.

The 10-City composite index fell by 0.5% month-over-month. The larger 20-City Composite index showed a 0.4% monthly decline – the first monthly decrease since March 2012.

Just seven cities tacked in the S&P CoreLogic Case-Shiller Index reported increased home prices in July.

“As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day,” Lazzara added. “Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate.”

Tampa outpaced all other cities with a 31.8% year-over-year increase in home prices in July. Miami ranked second at 31.7%, followed by Dallas at 24.7%. Washington, D.C., Minneapolis and San Francisco reported the smallest annual gains.

The housing market’s decline has grown worse in the last few months – with some experts now predicting major price decreases by next year. So-called “pandemic boomtowns” that saw surging interest during the COVID-19 pandemic are expected to experience the largest downtick.

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