Home price increases slow down, may continue to weaken: Case-Shiller

On an annual basis, home prices increased 10.6% but a month-to-month comparison shows that prices dropped across the nation, according to the Case-Shiller's National Home Price NSA index. (iStock)

Annual home price growth slowed in September as rising mortgage rates continued to test affordability for homebuyers, according to the latest S&P CoreLogic Case-Shiller Indices report.

Home prices across the U.S. increased by 10.6% annually in September, down from 12.9% annually in August, Case-Shiller's National Home Price NSA index said. On a monthly basis, home prices fell by 1.0% from August. 

The difference between September and August's growth rates "reflects short-term declines and medium-term deceleration in housing prices across the U.S.," Craig Lazzara, the managing director of S&P Dow Jones Indices, said.

"As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be more expensive, and housing becomes less affordable," Lazarra continued. "Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to weaken."        

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Home prices fall as the housing market continues to slow

On a monthly basis, home prices fell across the nation in September, according to the report. The national home price index dropped 0.8% month-over-month and the 10-city and 20-city composites fell by 1.2%.

"Despite considerable regional differences, all 20 cities in our September report reflect these trends of short-term decline and medium-term deceleration," Lazzara said. "Year-over-year price gains in all 20 cities were lower in September than they had been in August."

The three cities with the highest price gains were Miami, Tampa, and Charlotte, which posted increases of 24.6%, 23.8% and 17.8%, respectively..

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Mortgage rates have begun to pull back

Mortgage rates have started to pull back in recent weeks as markets gain confidence that interest rate spikes will slow in 2023, according to Freddie Mac.

"For real estate markets, mortgage rates compounded the relentless increase in prices over the past two-and-a-half years, pushing many buyers to the sidelines," George Ratiu, a senior economist at Realtor.com, said in a statement. "The reprieve in the relentless surge is welcome news."

"However, financial pressures continue to make the path to homeownership an expensive one for many households," Ratiu continued.

The Federal Reserve is scheduled to meet before the end of the year and is expected to raise interest rates one final time this year as it looks to bring inflation to a target rate of 2%. The Consumer Price Index (CPI), a measure of inflation, increased 7.7% annually in October. 

However, how much the Fed raises rates by is likely to slow as it looks to assess the impact of rate increases on the economy and inflation. Minutes from the Federal Open Market Committee (FOMC) meeting in November showed that members viewed a smaller but still substantial 50 basis point rate increase likely for the upcoming December meeting. 

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