Home-price growth in the US slowed the most on record as a doubling of borrowing costs has sapped demand.
A national measure of prices increased 13% in August from a year earlier, down from 15.6% in July, the S&P CoreLogic Case-Shiller index showed Tuesday. That’s the biggest deceleration in the index’s history.
The housing market has started to slump as the Federal Reserve hikes interest rates to curb the hottest inflation in decades. Even with the deceleration, prices remain high compared to last year. Coupled with mortgage rates that are edging closer to 7%, many would-be buyers have been shut out, while some sellers have retired.
“The forceful deceleration in US housing prices that we noted a month ago continued,” Craig Lazzara, a managing director at S&P Dow Jones Indices, said in the statement. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”
A measure of year-over-year price growth in 20 US cities gained 13.1% in August, down from the 16% increase in July. All of those cities posted lower price increases in the year ended August as compared to the year ended July. Miami and Tampa, Florida, as well as Charlotte, North Carolina, posted the biggest gains.
Seattle-area prices were up 9.9% year over year, according to the index, which tracks single-family home prices in areas of King, Snohomish and Pierce counties. But of the 20 metro areas the index tracks, Seattle saw among the largest month-to-month price drops from July to August at 3.9%. Only San Francisco saw a larger decline: 4.3%.
The analysis tracks with other research. In September, Redfin found Seattle was the fastest cooling market in the country, likely because higher interest rates are squeezing buyers who were already on the edge of being able to afford the region’s high home prices. King County sold for $875,000, according to the Northwest Multiple Listing Service.
The market’s shift in recent months has started to cool the pandemic boom, when houses were quickly snapped up. Sales of existing homes fell for an eighth straight month in September, according to National Association of Realtors data, while new home construction also dropped in September, according to recent government data.
“As we move into the colder months of the year, we can expect further declines in home sales and continued downward adjustment in prices,” said George Ratiu, manager of economic research at Realtor.com.
Homebuilders have been hit by the sudden market slowdown. PulteGroup Inc. reported Tuesday that canceled deals spiked and third-quarter orders plunged as demand faltered.
Seattle Times real estate reporter Heidi Groover contributed to this report.