According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices in the United States grew by 3.2% in August. This is the first year-over-year increase in the rate of home price growth since March 2018 and up from a revised 3.1% in July. In addition, home prices in San Francisco fell for the first time in seven years while growth in Seattle turns positive for the first time in four months.
Average home price growth in the top 10 metropolitan areas increased by 1.5%, down from the previous month’s 1.6% increase. In addition, the top 20 metropolitan areas entered ended its 16th straight month of slowing price growth, posting a gain of 2% year over year, unchanged from July. Eleven of the top 20 metropolitan areas reported lower price increases compared to the previous month, which is unchanged from July.
Phoenix sits at the top of the pack for the third straight month and actually experienced its pace of growth increase from July, growing from 5.8% to 6.3%. Charlotte, North Carolina and Tampa, Florida follow Phoenix as the fastest-growing housing market in the 20-city index, with home price growth of 4.5% and 4.3%, respectively. Las Vegas is now out of the top three. Home price growth in San Francisco turns negative for the first time since 2012, falling 0.1% year-over-year, while Seattle bucks a three month trend of falling prices by posting gains of 0.7% in August.
This month’s report brought us the first sign that lower mortgage rates might be prolonging a housing market expansion that might otherwise be in its waning months. Though the decision to purchase a home is dependent upon a much broader set of criteria than interest rates, in today’s supply and affordability-constrained market, they perhaps matter more than they have in the past. When housing is inexpensive, homebuyers may not be mortgage rate sensitive because changing rates have little impact on the marginal buyer’s ability to qualify for a mortgage. However, when housing is more expensive, such as in today’s market, rapidly-falling mortgage rates allow more buyers on the sidelines to qualify for a mortgage, thus boosting short-run demand and allowing price growth to again turn upwards.
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