The U.S. housing market continued to sag in October as the impact of higher mortgage rates and concerns over the economy rattled buyers and sellers.
Prices fell 0.5% from September, the fourth consecutive monthly decline for a seasonally adjusted measure of home prices in 20 large cities, according to the latest S&P CoreLogic Case-Shiller index.
The market began downshifting earlier this year as the Federal Reserve started hiking its benchmark interest rate, with the goal of easing high inflation that’s been driven in part by skyrocketing housing costs.
Rates for 30-year, fixed mortgages reached 7.08% in October – and again in November – though they have since retreated, Freddie Mac data show. With borrowing costs roughly double where they were at the start of the year, and inflation leaving less savings to put toward a down payment, homebuyers have pulled back. Sellers are also reluctant to list their properties, yet houses that are on the market are lingering and getting discounted as demand slumps.
“As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be a headwind for home prices,” Craig Lazzara, managing director at S&P Dow Jones Indices, said in a statement last week. “Given the continuing prospects for a challenging macroeconomic environment, prices may well continue to weaken.”
Even as prices fall on a monthly basis, they’re still higher than they were a year ago, though the rate of gains has declined. A nationwide gauge was up 9.2% in October from a year earlier, down from 10.7% in September.
In the 20-city index, the largest annual price gains were in Miami; Tampa, Florida; and Charlotte, North Carolina. In Miami, prices were up 21% year over year. San Francisco saw the smallest increase, at 0.6%. In October from September, prices fell the most in Las Vegas and Phoenix, with declines of 1.3% and 1.2% respectively, according to the seasonally adjusted index. Miami, San Francisco and Dallas each had a 0.9% decrease month over month.