U.S. home prices decelerated at a record pace in July, despite remaining elevated compared to a year back, according to S&P Dow Jones Indices.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, registered a 15.8 percent gain in July 2022 compared with July 2021, a Sept. 27 press release states. But compared to the 18.1 percent growth in June 2022, the July number is down by 2.3 percent. Craig J. Lazzara, managing director at S&P DJI, called the 2.3 percent monthly difference the “largest deceleration in the history of the index.”
The 10-City Composite registered a growth of 14.9 percent in July, down from the 17.4 percent gain in June. The 20-City Composite posted an increase of 16.1 percent in July, which is less than the 18.7 percent growth in the previous month.
Existing U.S. home sales had fallen by 5.9 percent in July, according to data from the National Association of Realtors (NAR), which called the situation a “housing recession.” In August, U.S. existing home sales slowed down for the seventh consecutive month.
According to the S&P report, the highest year-over-year gains in July among 20 cities were seen in the Florida cities of Tampa and Miami, and in Dallas, Texas.
While Tampa saw a 31.8 percent increase in prices, Miami registered a gain of 31.7 percent, and Dallas was third, with home prices rising by 24.7 percent. Compared to June 2022, price increases in all 20 cities for the year ended July 2022 were lower.
“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 prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate,” Lazzara said.
Elevated mortgage rates are one of the main reasons for cooling down in the housing market. According to data from Freddie Mac, the average rate for a 30-year fixed-rate mortgage was 6.29 percent for the week ended Sept. 22, which is more than double the 2.88 percent a year back.
An analysis by The Wall Street Journal showed that a person who bought a home with a 20 percent downpayment and 2.88 percent interest would only pay around $200,000 in total interest over the 30-year mortgage period. But with the rate at 6.29 percent, the total interest paid would equate to $490,000.
Mortgage rates started climbing swiftly after the Federal Reserve began to raise its benchmark interest rate this year.
In February, the federal funds rate was just at 0.8 percent, which has now risen to a range between 3.0 percent and 3.25 percent. On Feb. 2, the average rate for a 30-year fixed-rate mortgage was only 3.55 percent.
Members of the Fed’s policy-making arm, the Federal Open Market Committee (FOMC), are expecting interest rates to rise to 4.6 percent by the end of next year.
Reporting from The Epoch Times.