After increasing for 14 straight months, home price growth finally slowed in September. Experts say it’s a step in the right direction for buyers in 2022.
CHARLOTTESVILLE, Va. – After increasing for 14 straight months, home price growth finally slowed in September.
The latest CoreLogic Case-Shiller Home Price Index released Tuesday shows home prices increased 19.5% between September 2020 and September 2021. That’s down from a record 19.8% year-over-year increase in August.
To be sure, even as there are more signs the market is cooling down, homes are still really expensive. A study by Realtor.com showed the October national median listing price was $380,000- up 8.6% from the same period last year. The National Association of Realtors put the median sale price that month at $353,900.
While the numbers may seem like more bad news for homebuyers, experts note that the slowdown in home price growth is a step in the right direction.
“The slowdown was not unexpected as affordability concerns have caused some potential buyers to pull back from the market, reducing the number of bidding wars and causing house prices to moderate,” Odeta Kushi, deputy chief economist for the First American title insurance company, said on Twitter.
Where are home prices increasing most?
The CoreLogic Case-Shiller 10-City Composite Home Price Index increased by 17.8% year-over-year in September, down from 18.6% in the previous month. Meanwhile, the CoreLogic Case-Shiller 20-City Composite Home Price Index saw an annual increase of 19.1% in September, down from 19.6% in the previous month. Both indices measure changes in sale prices of residential real estate in large metropolitan areas in the U.S.
Home prices are rising much faster in some areas than others. If you’re thinking about buying a home in Phoenix, Tampa or Miami and haven’t been keeping up with the latest price trends, you may be particularly in for a shock. These three cities reported the highest year-over-year growth in home prices among cities in the CoreLogic Case-Shiller 20-City Composite Index.
Here’s how much home prices increased year over year:
- Phoenix, up 33.1%; Tampa, up 27.7%; Miami, up 25.2%
Meanwhile, home prices in all 20 cities in the index stand at all-time highs.
Why are homes so expensive?
COVID-19 spread economic havoc across industries. And the housing market was no exception. Early on in the pandemic, many city dwellers moved to the suburbs, where it was less densely populated. In fact, a study by Realtor.com found that in the second quarter of 2020, 51% of searches by residents in the country’s 100 largest metro areas landed on suburban properties – a record high.
More importantly, the Federal Reserve lowered interest rates to nearly zero to speed up economic recovery at the peak of the pandemic. As a result, Americans suddenly saw mortgage rates drop to historic lows of around 2%. That has heated up the real estate market and sent prices soaring.
At the same time, there haven’t been enough available homes to meet the demand, which has further caused prices to rise as buyers compete over a relatively small supply of properties. According to the National Association of Realtors, the inventory of active listings nationally in October was down 12% compared to the same month in 2020.
“There is still low availability of for-sale homes, which continues to drive price growth,” CoreLogic Deputy Chief Economist Selma Hepp said in a statement. “But the competition has faded and assuaged some of the bidding war intensity. Overall, home price growth is likely to continue slowing over the next year.”
What’s more, experts say a growing number of owners is preparing to list homes for sale in the next six months.
“Inflation and rising mortgage rates are squeezing many household budgets,” Realtor.com Manager of Economic Research George Ratiu said in an email to Money. “As a result, prices are beginning to cool in some markets. For buyers, the landscape looks more promising as we head into 2022.”
This article originally appeared on Money.com. Opinions expressed in this article are the author’s alone, not those of a third-party entity, and have not been reviewed, approved, or otherwise endorsed.
By Javier Simon. Copyright © 2021, Charlottesville Business Journal, Charlottesville, VA; © 2021 Ad Practitioners, LLC. All rights reserved.
