U.S. home prices on a seasonally adjusted basis declined 0.2% in July from June, according to the S&P CoreLogic Case-Shiller National Home Price Index, the Wall Street Journal reports, the first decline in this measurement in a decade.
On a month-over-month basis, home prices fell 0.3%, the first such decline since January 2019.
However, on a year-over-year basis, the national index was up 15.8% in the 12 months ended July, down from a 18.1% surge in home prices in June.
“July’s report reflects a forceful deceleration,” Craig Lazzara, managing director of S&P Dow Jones Indices, tells WSJ. “As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive.”
The average interest rate on the most popular U.S. home loan, the 30-year mortgage, climbed to 6.52%, its highest level since August 2008, data from the Mortgage Bankers Association (MBA) showed Wednesday.
Rising mortgage rates are increasingly weighing on the interest-rate-sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs to curb high inflation.
The average contract rate on a 30-year fixed-rate mortgage rose by 27 basis points to 6.52% for the week ended Sept. 23, a level not seen since the financial crisis and the Great Recession.
As the Federal Reserve continues to increase the fed funds rate which banks use as a guideline for the interest rates they charge on key banking products, most notable of which is mortgages, home ownership is expected to become much less affordable. The Fed hopes a deliberate slowdown in the housing market will help stanch inflation.
Indeed, the National Association of Realtors’ housing-affordability index—which factors in mortgage rates and home prices for existing single-family homes—fell to its lowest level in June 2022, not seen since June 1989.
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