U.S. home prices rose in May, but at a slower pace. S&P Case-Shiller’s National Home Price index reported year-over-year home price growth of 19.70 percent in May as compared to April’s record year-over-year home price growth pace of 20.60 percent. Tampa, Florida led the 20-City Index with year-over-year home price growth of 36.1 percent; Miami, Florida followed with year-over-year home price growth of 34.0 percent. Dallas, Texas reported year-over-year home price growth of 30.8 percent.
Minneapolis, Minnesota, Chicago, Illinois, and Washington, D.C. had the lowest rates of home price growth, but no cities in the 20-City Home Price Index reported declines in home prices. Economists said that slowing growth in home prices could signal that home prices have peaked after years of rapid appreciation.
Affordability, Rising Mortgage Rates Impact Home Price Growth
Rapid home price growth is self-limiting in terms of affordability and the ability of home buyers to qualify for mortgages needed to complete their purchases. Rising mortgage rates also impact affordability as higher mortgage rates reduce funds available for purchasing homes. Current rates for a 30-year fixed-rate mortgage averaged 5.54 percent last week as compared to 2.78 percent approximately one year ago.
Craig J. Lazzara, managing director at S&P Dow-Jones Indices, said that deceleration in home price growth was already occurring and he cautioned that a more challenging environment “may not support extraordinary home price growth much longer.” Analysts said that high mortgage rates and rising home prices would ease demand for homes and would slow rapid home price growth in the coming months, but they did not expect significant reductions in home prices to occur immediately.
The Federal Reserve raised its key interest rate range by 0.75 percent on July 27 and is expected to continue raising its rate range throughout 2022 in its efforts to ease inflation. As interest rates rise for credit cards, home loans, and personal loans increase, consumer demand is expected to ease and calm rapid inflation.
FHFA Home Prices Rise in May
The Federal Housing Finance Agency reported that home prices for properties owned or financed by Fannie Mae and Freddie Mac rose by 1.4 percent month-to-month and 18.3 percent year-over-year in May. Fannie Mae and Freddie Mac’s loan limits impact prices for homes owned or financed by the two government-sponsored enterprises.
Will Doerner, Ph.D. and supervisory economist at Freddie Mac, said: “House prices continued to rise in May but at a slower pace. Since peaking in February, price appreciation has moderated slightly. Price growth remains above historical levels and was supported by the low inventory of properties for sale.” Signs of slowing economic growth, rising mortgage rates, and fears of recession also sidelined would-be home buyers.Share
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.