S&P CoreLogic Case-Shiller: Home Price Growth Loses Steam Amid Rising Financial Pressures
What did the data show?
Today’s S&P CoreLogic Case Shiller Index spotlights a housing market that is losing steam as it moves through the peak summer months. With home prices at new highs, inflation giving many workers an effective pay cut, and mortgage rates 250 basis points above last year’s levels, buyers are finding themselves hard-up against an affordability ceiling.
While index prices rose 18% higher from a year ago in June, the advance is showing clear signs of a slowdown from the prior month’s 19.7%. The 10- and 20-city indices advanced by 17.4% and 18.6%, respectively, backing off from the 19.1% and 20.5% increases in May. Tampa, Miami, and Dallas posted the largest price gains.
With buyers running out of financial options, it is not surprising that sales of new and existing homes have been dropping in the first half of the year. Compared to trends we saw during the pandemic, when home shoppers’ fear of missing out on record-low mortgage rates fueled a feverish search for a safe haven, today’s housing market is experiencing a hangover of sorts.
What does it mean for homebuyers, sellers, and the housing market?
Looking at the road ahead, real estate markets are expected to continue sobering from the euphoria of the past two years that was induced by fiscal and monetary easing. The good news for buyers is that these shifts are tempering the relentless ascent of prices, while the inventory of homes for sale continues to expand. With listed properties waiting longer for buyers’ offers, price cuts are growing in popularity nationwide and by 30% or more in many of the cities that were among the most attractive destinations for homebuyers during the pandemic—Las Vegas, Phoenix, Austin, Sacramento, and Denver, to name a few.
For sellers, it is clear that today’s housing market is changing rapidly, and striking the right price from the start could be key to a timely and successful transaction. The latest Realtor.com survey focused on sellers highlights that 92% of homeowners who sold this summer had to accept concessions in a changing market, a visible sign that buyers are regaining their bargaining power. A majority of today’s home shoppers are asking for home inspections and expecting to have necessary repairs made before closing. Moreover, price negotiations have returned to the market, a much-needed and welcome development on the road toward a new normal. Buyers who have been wondering if they will get a break during the last two years are looking upon a more promising horizon in the next few months.
George Ratiu
