U.S. home prices fell in July over the previous month, marking the first nationwide monthly decline since 2012.
The S&P CoreLogic Case-Shiller Index report indicates that prices across the country fell between June and July by 0.2% after seasonal adjustment. The more narrow 10-City Composite index fell by 0.5% and the 20-City Composite was off by 0.4%.
Even though home prices fell month-over-month, they were still holding higher than they were in July of 2021. On the year-over-year index, prices were up nationally by 15.8%. However, that was a substantial drop from the 18.1% year-over-year number from June.
The year-over-year numbers for the 10-City and 20-City Composites were off by similar margins compared to the June measurements.
S&P DJI managing director Craig J. Lazzara said that even though prices are still higher than in 2021, the monthly drop “reflects a forceful deceleration.” He noted that the 2.3% drop from June to July marked the largest single-month deceleration in the history of the index.
This chart via @resi_analyst is truly frightening. Right now, at least 3000 households every day are coming out of their fixed rate mortgage. Most have been on under 2% interest. The best rate now is around double that. It may soon be treble. This is how housing markets crash. pic.twitter.com/iCtq7lSrmU
— James Withers (@JamesRWithers) September 26, 2022
The housing market is starting to suffer as a result of recent interest rate hikes imposed by the Federal Reserve. The Fed has been making regular increases in lending rates in an effort to tamp down the surging inflation the Biden White House and Democrats have saddled the economy with over the last two years.
Because of the direct impact on the cost of mortgage borrowing, interest rate hikes typically have a pronounced and immediate impact on the housing market. Average mortgage rates around the country rose above 6% in June before dipping back into the high 5% range in July and August. With the most recent Fed adjustment, rates are now climbing toward 7%.
With overall prices higher than in the last couple of years, the higher mortgage rates are significantly hampering home affordability. Year-over-year home prices were running the highest in the 34 years of the index until the recent sudden deceleration.
Lazzara said that as the Fed continues to move interest rates higher, “mortgage financing has become more expensive, a process that continues to this day.” He added that as the entire economy faces recession and continuing inflation on essential products, “home prices may well continue to decelerate.”