Rising mortgage rates are keeping some home buyers out of the market.
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Economists estimate home prices rose above year-ago levels in July for the first time in five months. More current data show the trend continued last month.
One closely watched measure, the S&P CoreLogic Case-Shiller home price indices, is set for release on Tuesday morning. Economists expect home prices in 20 of the nation’s large metropolitan areas increased 0.3% in July from one year prior, the first such gain since February. In June, the most recent month for which data is available, the index was 1.2% lower than the all-time high set one year prior.
A positive reading in the 20-city index would put a bookend on what turned out to be a relatively shallow home price pullback. Unadjusted prices measured by the Case-Shiller 20-city index dropped a little under 7% from peak to trough following mortgage rates‘ significant climb in late 2022 and through 2023.
While prices dropped from year-ago levels for the first time in February, monthly data show that much of the acute pullback happened in late 2022, with 2023’s declines coming as home prices failed to reach their prior peaks this year.
While Case-Shiller is one of the most closely watched measures of home prices, it also has a significant lag. More recent, though less comprehensive, data show that home prices have risen above year-ago levels for two straight months as high mortgage rates keep sellers from listing their homes.
The average 30-year fixed mortgage rate last week was 7.19%, according to Freddie Mac—almost one point higher than a year prior, and well off the less-than-3% rates that were common earlier in the pandemic.
CoreLogic, which releases a separate home price index about two weeks in advance of the Case-Shiller data, found that home prices in July were 2.5% higher nationally than year-ago levels. “Annual home price growth regained momentum in July, which mostly reflects strong appreciation from earlier this year,” Selma Hepp, CoreLogic’s chief economist, said in a statement.
Existing homes in August were sold at the slowest seasonally adjusted annual rate since January, National Association of Realtors data show—but prices perked up. The median home last month sold for $407,100, a price 3.9% higher than one year prior. August’s data marked the second straight month of positive year-over-year price gains, which began in July.
Home prices might be gaining, but the recent numbers are far from the runaway price appreciation seen earlier in the pandemic. “High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages,” said CoreLogic’s Hepp. “In other words, home prices are still growing but are in line with historic seasonal expectations.”
While prices measured by the 20-city index look set to increase, it’s unlikely to be uniform across geographies. In June, prices were lowest compared with year-ago levels in San Francisco, Seattle, and Las Vegas, and highest in Chicago, Cleveland, and New York, Case-Shiller data show.
Write to Shaina Mishkin at [email protected]
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