The descent of U.S. home prices escalated in August, fueled by soaring mortgage rates and decreased homebuyer demand, according to the latest results of the S&P CoreLogic Case-Shiller home price index.
The index saw a year-over-year gain of 13% in August, down from 15.6% in July. It was the fifth straight month of yearly declines for the index, while the non-seasonally adjusted month-over-month index saw a second straight month of negative growth, receding by 0.5%.
Price deceleration also was evident in the two subindexes that track the country’s largest cities. The 10-city composite index was up 12.1% annually in August, down from 14.9% in July. The 20-city composite was up 13.1%, compared to 16% growth a month earlier. Price deceleration was slightly higher in the 20-city index, since it includes some more affordable secondary markets that surged in popularity during the post-pandemic housing boom and are now being stung even more by declining affordability.
“The forceful deceleration in U.S. housing prices that we noted a month ago continued in our report for August 2022,” said Craig J. Lazzara, managing director for S&P Dow Jones Indices. He went on to note that the 2.6 percentage-point decline in the annualized gains from July to August represents the largest deceleration in the history of the index (with July’s deceleration now ranking as the second largest).
“Further, price gains decelerated in every one of our 20 cities. These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since,” Lazzara said.
At the pace recorded in August, CoreLogic projects annual price growth to fall to 9% by December and below 1% by the end of first-quarter 2023.
Lazzara pointed out that August home prices were still easily above where they were at the same time last year for each of the 20 cities in the larger subindex. But he also conceded that the current environment exacerbates the likelihood of further slowing.
“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable,” he said. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”