Home price growth slowed to its lowest rate in 20 months according to the 20-City Home Price Index issued by Case-Shiller. After years of dismal readings, Las Vegas, Nevada led the cities included in the index.
Top three cities for August included Las Vegas, Nevada where year-over-year home prices grew by 13.90 percent. San Francisco, California saw home prices increase by 10.60 percent year-over-year and Seattle, Washington home prices rose by 9.60 percent year-over-year. August’s 20-City Home Price Index overall reading fell below six percent for the first time in a year.
Cooling Home Price Growth Helps Balance Housing Markets
Cooling home prices have been forecast for months, but August’s reading indicated that home prices have peaked and that current home price growth rates may ease pressure on overheated real estate markets, where high home prices, limited inventories of homes for sale and rising mortgage rates have limited buying opportunities. Home price growth remained above current rates of wage growth and inflation, but slower appreciation of home values will help balance the housing market from an extreme sellers’ market to more moderate market conditions.
Rising Mortgage Rates Not Sole Cause of Easing Home Prices
Dallas Federal Reserve President Robert Kaplan recently said that rising mortgage rates were not the only cause of slowing growth of home prices. Mr. Kaplan said that multiple factors including rising building costs, labor shortages and rising mortgage rates combined to ease record demand for home; Mr. Kaplan said that the Fed is closely monitoring the economy and housing markets and mentioned that he had previously forecast slower housing markets as 2019 approaches.
Recent stock market sell-offs boosted the 10-year Treasury note price, but this momentum appears to be settling. Fixed mortgage rates are connected to yields on 10-year Treasury notes. Yields rise as note prices decline. Mortgage rates rise as the 10-year Treasury yield rises. While nothing is set in stone, this situation indicates that mortgage rates could continue to rise.
Rising mortgage rates and strict mortgage lending requirements have barred home buyers concerned with affordability and less than perfect credit profiles. As prospective home buyers abandon their home searches, demand for homes should ease and may further reduce gains in home prices.
If you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted mortgage professional to discuss current financing options.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.