The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, tracking the 20 largest metropolitan areas, reported a 0.3% month-over-month increase in October, after seasonal adjustment. This marks another record high for home prices, even as annual price growth continues to moderate. Year-over-year, the National Index saw a 9.2% increase in October, a notable slowdown from the 10.7% annual gain reported in September.
The 10-City Composite annual increase was 8.0% in October, down from 9.7% in the previous month. Similarly, the 20-City Composite showed an 8.6% year-over-year increase, a decrease from September’s 10.4% gain. October marked the fifth consecutive month of decelerating annual price growth in both Composites.
“October 2022 marked the fifth consecutive month of decelerating national home price gains,” says Craig J. Lazzara, Managing Director at S&P DJI. “Although one month’s data does not make a trend, the softening in home prices that we’ve observed over the past few months has become increasingly widespread.”
Miami, Tampa, and Charlotte reported the highest year-over-year gains among the 20 cities tracked by the index. Miami led with a 19.7% year-over-year price increase, followed by Tampa with 17.7%, and Charlotte with 15.0%. All 20 cities reported lower price increases in the year ending October 2022 versus the year ending September 2022.
As mortgage rates have risen sharply throughout 2022, housing affordability has declined significantly, impacting buyer demand. This has contributed to the slowdown in price growth observed in recent months. Higher borrowing costs have effectively priced some potential buyers out of the market, leading to reduced competition and a cooling effect on price appreciation.
“As the Federal Reserve continues to move interest rates higher, mortgage financing has become more expensive and housing affordability has deteriorated,” adds Lazzara. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”
Despite the slowdown in price appreciation, the housing market remains relatively strong, supported by limited inventory and ongoing demographic trends. However, the future trajectory of home prices will likely depend on the broader economic outlook, including inflation, interest rates, and employment growth. Continued increases in mortgage rates could further dampen buyer demand and lead to more significant price declines in the coming months.
The ongoing trend of decelerating price growth suggests a shift in the housing market dynamics. While not indicative of a crash, the moderation in price increases points to a more balanced market environment compared to the rapid appreciation seen in recent years. The interplay between interest rates, affordability, and inventory levels will continue to shape the housing market landscape in the foreseeable future.
