A prospective homeowner tours a home in Julpa Valley, California.
Nicola Groom | Reuters
U.S. single-family home prices slowed further in September as rising mortgage rates eroded demand, a closely watched survey showed on Tuesday.
The S&P CoreLogic Case Shiller National Home Price Index fell 0.8% month-on-month in September. Monthly home prices fell in July for the first time since late 2018.
House prices rose 10.6% y/y in Sep, slowing from a 12.9% rise in Aug.
The housing market has been hit by aggressive rate hikes by the Federal Reserve aimed at containing economic demand and keeping high inflation in check.
Interest rates on 30-year fixed mortgages topped 7% in October for the first time since 2002, data from mortgage lender Freddie Mac showed. It fell to an average of 6.58% last week, well above the 3.10% average for the same period last year.
“Mortgage financing remains expensive as the Fed continues to raise interest rates, making housing less affordable,” S&P DJI managing director Craig Lazzara said in a statement. Given the continued outlook for the economic environment, house prices may continue to fall.”
Sales of previously owned homes fell for the ninth straight month in October, while single-family home construction and future building permits fell to their lowest level since May 2020, according to this month’s data.
However, with tight supply, house prices are likely to remain at bottom. The surge in remote work during the COVID-19 pandemic has triggered a boom in the housing market, driving prices to record highs.
Another report from the Federal Housing Finance Agency said house prices rose 0.1% on a monthly basis in September after falling 0.7% in August. In the 12 months to September, prices were up 11.0% after he rose 12.0% in August.
“U.S. house price inflation has slowed significantly,” said William Dorner, supervising economist at the FHFA’s Office of Research and Statistics.
“This slowdown is widespread, with about a third of all states and metropolitan statistical areas experiencing annual growth below 10%.”