Annual price growth within the increasingly fragile US housing market slid into the one digits in October for the primary time in about two years when mortgage rates that month surged above 7% and further stifled demand, a pair of closely watched surveys showed on Tuesday.
The S&P CoreLogic Case Shiller national home price index increased by 9.2% in October, down from 10.7% in September and notching the primary single-digit gain since November 2020.
Meanwhile the Federal Housing Finance Agency, which oversees US mortgage-finance entities Fannie Mae and Freddie Mac, said annual home price growth slowed to 9.8% in October from 11.1% in September, marking that index’s first non-double-digit gain since September 2020.
On a month-over-month basis, S&P Case Shiller’s index fell for a fourth straight month, while FHFA’s gauge was unchanged. “Because the Federal Reserve continues to maneuver rates of interest higher, mortgage financing continues to be a headwind for home prices,” Craig Lazzara, managing director at S&P DJI, said in an announcement.
The housing market has suffered probably the most visible effects of aggressive Fed rate of interest hikes which can be geared toward curbing high inflation by undercutting demand within the economy. This month the Fed raised rates again by half a percentage point, capping a yr that saw its benchmark rate shoot from near zero in March to between 4.25% and 4.5% now — the swiftest rates have risen because the early Eighties. Fed officials projected rates would climb further in 2023, likely topping 5%.
The 30-year fixed mortgage rate breached 7% in October for the primary time since 2002, greater than doubling within the span of nine months, pulling the rug out from what had been a red-hot housing market fueled by historically low borrowing costs and a rush to the suburbs throughout the coronavirus pandemic.
Data last week showed the combined annual sales rates of recent and existing homes through November had slumped by 35% since January — among the many fastest falls on record — to the slowest since late 2011. Recent single-family housing starts and permit issuance skidded to a two-and-a-half-year low last month as well.
Economists don’t, nonetheless, see a repeat of the housing price crash witnessed within the financial crisis when prices by S&P Case Shiller’s measure fell year-over-year for a full five years from March 2007 through April 2012. Unlike then, the provision of homes in the marketplace stays extraordinarily limited and may keep a floor under house prices.
The National Association of Realtors earlier this month projected prices for existing homes — by far the biggest a part of the market — should remain roughly flat in 2023.