According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices in the United States grew by 3.1% in June. This is the 15th consecutive month of slowing home-price growth. In addition, home prices in Seattle dropped for the third month in a row, while San Francisco inches closer to seeing its first home price drop since 2012.
Average home price growth in the top 10 metropolitan areas increased of 1.8% this June, down from the previous month’s 2.2% increase. Additionally, the top 20 metropolitan areas entered the 14th straight month of slowing price growth, posting a gain of 2.1% year over year, down from 2.4% in May. Eleven of the top 20 metropolitan areas reported lower price increases compared to the previous month. This is less than May, when 13 of the top 20 saw an increase from the previous month.
Phoenix has overtaken Las Vegas as the fastest-growing housing market in the 20-city index, with home price growth of 5.8% and 5.5%, respectively. Metros with the largest slowdown from the previous year continue to be in the West: Seattle (14.1% point drop), San Francisco (9.9% point drop) and Las Vegas (7.5% point drop). Seattle experienced falling home prices for a third straight month, with year-over-year declines of 1.3%. San Francisco also inched closer to flat growth with a year-over-year increase of just 0.7%, its lowest gain since 2012.
While mortgage rates have come crashing down over the past few months, they have not yet had any impact on housing prices. Why is this? First, falling mortgage rates have led to a sharp increase in refinancing since there is an immediate and tangible benefit to existing homeowners who purchased at rates that were 100 – 150 basis points higher just nine months ago. Second, homebuyers base their decision on a much broader set of criteria than refinancers, which include life-cycle events such as marriage, raising children, divorce or retirement. That said, if mortgage rates continue to fall, wages continue to grow and inventory continues to tick up, we can expect the U.S. home price growth to stabilize or even reverse course by the end of the year.
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