US home price gains decelerated for the fourth consecutive month in July, in response to rising mortgage rates. The increase in rates helped slow the rapid price appreciation, bringing a welcome respite to home buyers, according to realtor.com.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, saw a 6% gain in July compared with July 2017, down from a 6.2% year-over-year increase reported in June.
Throughout the majority of the last two years, home prices have seen steady gains, growing significantly faster than both incomes and inflation, realtor.com reports. Fortunately, price gains began to taper in the last few months, as mortgage rates experienced slight increases and inventory in some areas began to grow.
“The slowing in the market is widespread,” said David Blitzer, managing director at S&P Dow Jones Indices.
The Case-Shiller 10-city index gained 5.5% over the year in July, down from the 6% gain the month prior. The 20-city index gained 5.9%, down from 6.4% the previous month. According to the report, 15 out of 20 cities saw smaller price increases in July than they did in July 2017.
Which city had the highest price acceleration?
Las Vegas had the fastest price growth rate in the country for the second straight month, at 13.7%. Seattle saw a 12.1% gain in price growth in the year ended in July. Thanks to a booming tech industry, San Francisco’s already high home prices grew an additional 10.8% compared with a year earlier in July.
What’s driving the trend?
According to realtor.com, more than five years of rising prices, combined with higher mortgage rates, are making homes less affordable. As rates climbed back toward the seven-year hight they hit in May, buyer activity slowed a bit, reflected in the slowing of existing-home sales.
“A staff working paper released this week from Federal Housing Finance Agency shows that a newly created affordability index, which measures the share of homes that households can afford to purchase if they put down a typical down payment amount, is falling,” writes Laura Kusisto, of realtor.com. “A household making the median income could afford 62% of homes on the market in the second quarter, down from 64% in the prior quarter and the three-decade high of 79% of homes in late 2012.”
Existing-home sales slipped back for the sixth straight month in August, the National Association of Realtors (NAR) reported earlier this month.