Home price growth slowed further in October

Annual home price growth continued to slow in October, with the year-over-year price gain shrinking for the seventh consecutive month, according to the S&P CoreLogic Case-Shiller National Home Price Index, released last Tuesday.

Nationwide home prices posted a yearly gain of 9.2% in October, bringing the index to a reading of 298.99. In September, the index recorded a year-over-year increase of 10.7%.

Month over month, the U.S. National Index was down 0.5%.

“These declines, of course, came after very strong price increases in late 2021 and the first half of 2022,” Craig Lazzara, the managing director of S&P DJI, said in a statement. “Despite its recent weakness, on a year-over-year basis the National Composite gained 9.2%, which is in the top quintile of historical performance levels.”

The Case-Shiller 20-city home price index posted a 8.6% annual increase, down from 10.4% in September. This yearly increase brought the 20-city index to a reading of 303.86. All 20 cities analyzed posted lower price increase in the year ending October 2022 as compared to the year ending September 2022.

(The Case-Shiller home price indices for October is a three-month average of closing prices in August, September and October. Because most home sales take several months from contract to closing, the data likely includes some deals struck in June and July.)

Home price growth in the 10-city composite index also slowed in Ocotber, reporting a yearly gain of 8.0% to a reading of 315.13. In September, the 10-city index posted an annual increase of 9.6%.

Yet again, Miami, Tampa and Charlotte had the highest annual gains among the 20 cities in October, with year-over-year increases of 21.0%, 20.5%, and 15%, respectively.

“Despite considerable regional differences, all 20 cities in our October report reflect these trends of short-term decline and medium-term deceleration. Prices declined in every city in October, with a median change of -0.9%,” Lazzara said. “The Southeast (+17.9%) and South (+17.0%) were the strongest regions by far, with gains more than double those of the Northeast, Midwest, and West. The two weakest performers were San Francisco (up only +0.6% year-over-year) and Seattle (+4.5%). San Francisco and Seattle peaked in May 2022, and both have declined by more than -10% since then.”

With the Federal Reserve expected to continue increasing interest rates in 2023, albeit at a slower pace, Lazzara said he expects the decline in home price growth to continue.

“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable,” Lazzara said. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”

Nichole Bachaud, Zillow’s senior economist, added: “With the winter quickly approaching, a time where housing market activity typically stagnates, home values are expected to continue their slide down. But these minor price drops aren’t enough to really impact affordability and thus demand. And with sellers staying idle as they continue to be locked into low rates and monthly payments, the low availability of homes for sale is continuing to keep the market tight.”