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Is The Summer Rush Obscuring A Deeper Housing Slowdown?

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The seasonal summer boom in the housing market has gone head-to-head with dramatically cooling market conditions. The latest data reflects the market appears to be “losing steam.”

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The summer is historically the housing market’s busiest season, as parents look to get their kids settled before the new school year starts and sellers aim to take advantage of the rush.

But this year that summer rush has coincided with slowing price growth, possibly concealing the extent to which demand for homes has fallen in this less affordable environment.

Annual home price growth dipped to 18 percent year over year in June, down from May’s nearly 20 percent annual growth, according to the S&P CoreLogic Case-Shiller Index released Tuesday.

The latest data reflects a housing market that appears to be “losing steam” even as it moves through the peak summer months, Realtor.com’s George Ratiu said in a statement.

“Compared to trends we saw during the pandemic, when home shoppers’ fear of missing out on record-low mortgage rates fueled a feverish search for a safe haven, today’s housing market is experiencing a hangover of sorts,” said Ratiu, senior economist for the listing website.

And the slowdown may be even more pronounced when focusing on recent months and accounting for seasonal factors.

In June for example, home prices rose 0.6 percent from the previous month, which, if it held in each of the months to come, would be an annualized rate of 7.4 percent per year — a strong rate but clearly in decline from previous months. 

But after accounting for seasonal factors that monthly gain drops to 0.3 percent from May to June. On an annualized basis, this would amount to 3.7 percent, falling well below the rate of growth in home values in a typical year even before the pandemic struck.

Still, big-picture price growth in June remained in historically strong territory overall, and prices have yet to drop nationwide, according to Craig Lazzara, S&P Dow Jones Indices’ managing director.

“It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip,” Lazzara said in the report. “June’s growth rates for all three composites are at or above the 95th percentile of historical experience.”

This general picture of slowing but still robust home price growth was upheld by the Federal Housing Finance Agency’s latest House Price Index numbers released Tuesday.

The agency recorded annual home price growth of 17.7 percent in the second quarter of the year. 

But on a seasonally adjusted basis, prices only rose 0.1 percent from May to June. If that pace held over the next 12 months, it would amount to annual growth of only 1.2 percent.

These numbers are a clear sign that housing price growth was slowing in the early summer, even as it posted big year-over-year increases, according to William Doerner, supervisory economist in FHFA’s Division of Research and Statistics.

“The pace of growth has subsided recently, which is consistent with other recent housing data,” Doerner said in the agency’s report.

Email Daniel Houston

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