US Home-Price Growth Slows Amid High Mortgage Rates

In July, U.S. home-price growth decelerated as persistently high mortgage rates discouraged potential buyers. According to S&P CoreLogic Case-Shiller, the national price index increased by 5% compared to the previous year, down from June’s 5.5% annual rise. On a seasonally adjusted basis, prices edged up 0.2% month-over-month, marking the 14th consecutive record.

Mortgage Rates Sideline Buyers

Growth has come at a cost, said Brian Luke, head of commodities at S&P Dow Jones Indices. He observed that all but two markets slowed in July, reflecting a broader trend. Eight markets experienced monthly declines, signaling further market cooling. Despite this, the index still surpasses long-term inflation-adjusted averages, maintaining its strong position. The overall housing market continues to show resilience amid these adjustments.

Despite market cooling, housing remains resilient, with growth still surpassing inflation-adjusted averages, according to wall street journal print edition.

Affordability Challenges Persist

The July index includes data beginning in May, when 30-year mortgage rates reached 7.22%, according to Freddie Mac. Since then, rates have slightly declined, offering some relief to potential homebuyers. Despite the dip, affordability continues to pose a significant challenge for many buyers. This affordability issue has reduced overall competition in the housing market. Buyers are facing limited options due to higher financial constraints.

Housing Supply on the Rise

Simultaneously, housing supply surged in July, marking a significant shift in the market. Active listings increased 14% year-over-year, signaling growth. Many homes remained unsold, according to a report by Redfin Corp. The sales volume stayed low, highlighting a quiet spring selling season. Overall, the market reflected a balance between rising supply and weaker demand.

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Federal Reserve’s Rate Cuts Offer Hope

The Federal Reserve’s recent interest-rate cut may provide relief to the housing market by reducing mortgage costs. Borrowing rates are now lower compared to May, offering potential buyers better opportunities. Ralph McLaughlin, senior economist at Realtor.com, predicts home-price growth will stabilize. He expects growth to bottom out and possibly reaccelerate by the end of the year. Improved purchasing power could drive this rebound in the housing market.

Regional Variations in Price Growth

The 20-city price index rose 5.9% annually in July, slightly down from June’s 6.5%. New York experienced the largest gain, increasing by 8.8%. Las Vegas followed closely with an 8.2% rise in home prices. Los Angeles saw a 7.2% increase, ranking third among major cities. Overall, these cities continue to show strong housing market growth despite a slight slowdown.

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