A “for sale” sign is displayed outside a single-family home on September 22, 2022 in Los Angeles, California.
Allison dinner | Getty Images
U.S. home prices cooled in July at the fastest rate in the history of the S&P CoreLogic Case-Shiller Index, according to a new report Tuesday.
House prices in July were still higher than a year ago, but cooled significantly from the rise in June. Prices nationally rose 1[ads1]5.8% compared to July 2021, well below the 18.1% increase last month, according to the report.
The 10-City composite rose 14.9% year over year, down from 17.4% in June. The 20-City composite rose 16.1%, down from 18.7% last month. July’s year-on-year gains were lower compared to June in each of the cities covered by the index.
“July’s report reflects a sharp slowdown,” Craig J. Lazzara, chief executive of S&P DJI, wrote in a release, noting the difference in annual gains in June and July. “The -2.3% difference between the two monthly gains is the largest slowdown in the index’s history.”
Tampa, Miami and Dallas saw the highest annual gains among the 20 cities in July, with increases of 31.8%, 31.7% and 24.7%, respectively. Washington, DC, Minneapolis and San Francisco saw the smallest gains, but were still well above year-ago levels.
Another report from the National Association of Realtors showed that home prices softened dramatically from June to July. Prices usually fall during that time, due to the strong seasonality of the housing market, but the decline was three times the average decline historically.
The share of homes with price cuts reached about 20% in August, the same as in 2017, according to Realtor.com.
“For homeowners planning to list, today’s market is significantly different than it was three weeks ago,” said George Ratiu, senior economist and head of economic research for Realtor.com.
House prices are falling because affordability has weakened dramatically due to rapidly rising mortgage interest rates. The average interest rate on the popular 30-year fixed mortgage started this year around 3%, but had briefly passed 6% in June. It stayed in the high 5% range throughout July and is now heading toward 7%, making the average monthly payment about 70% higher than a year ago.
“As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the outlook for a more challenging macroeconomic environment, home prices may well continue to decline,” Lazzara said.