Annual price increases in the increasingly volatile US housing market fell to single-digit levels in October for the primary time in about two years, with mortgage rates above 7% this month.
The S&P CoreLogic Case Shiller national home price index rose 9.2% in October, up from 10.7% in September, posting its first single-digit increase since November 2020.
Meanwhile, the Federal Housing Finance Agency, which oversees U.S. mortgage financers Fannie Mae and Freddie Mac, said annual house price growth slowed to 9.8% in October from 11.1% in September, marking the primary non-double-digit increase this yr. index as of September 2020 .
On a monthly basis, the S&P Case Shiller index fell for the fourth month in a row, while the FHFA index was unchanged. “Because the Federal Reserve continues to raise rates of interest, mortgage financing continues to be a drag on home prices,” Craig Lazzara, managing director of S&P DJI, said in an announcement.
The housing market has been hit hardest by the Fed’s aggressive rate of interest hikes, which aim to curb high inflation by undercutting demand in the economy. This month, the Fed raised rates again by half a percentage point, limiting the yr its benchmark rate of interest fell from near zero in March to between 4.25% and 4.5% today – the fastest rise for the reason that early Eighties. Fed officials predicted rates of interest would rise even further in 2023, possibly exceeding 5%.
Fixed 30-year mortgage rates surpassed 7% for the primary time since 2002 in October, greater than doubling in nine months, pulling the carpet out of a red-hot housing market fueled by historically low borrowing costs and rushing to the suburbs amid the coronavirus pandemic .
Last week’s figures showed that combined annual sales rates for brand spanking new and existing homes through November fell 35% from January – certainly one of the fastest declines on record – to the lowest level since late 2011. the lowest in two and a half years last month.
Nevertheless, economists don’t predict a repeat of the collapse in housing prices seen in the course of the financial crisis, when prices as measured by S&P Case Shiller fell year-on-year for a full five years from March 2007 to April 2012. The housing market stays extremely limited and will stay below house prices .
The National Association of Realtors earlier this month predicted that the costs of existing homes – by far the biggest a part of the market – should stay roughly the identical in 2023.