US home prices dropped for the fifth month in a row in November, as rising mortgage rates pushed prospective buyers out of the housing market late last year and prices continued to cool, according to the latest S&P CoreLogic Case-Shiller US National Home Price Index, released Tuesday.
Last July marked the first month-over-month decrease for the national index since February 2012 and that continued through November, with seasonally adjusted prices falling 0.3% month over month.
All cities in the 20-city index reported declines before seasonal adjustments. After seasonal adjustments, 19 cities still reported declines, with only Detroit increasing 0.1%.
“November 2022 marked the fifth consecutive month of declining home prices in the US,” said Craig J. Lazzara, managing director at S&P DJI. “As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices.”
Compared to prices from the year before, US home prices nudged higher in November, but the pace of that growth slowed from prior months.
Home prices rose 7.7% in November from the year before, a smaller jump than the 9.2% growth seen in October, according to the latest S&P CoreLogic Case-Shiller US National Home Price Index, released Tuesday.
Cities in the South led price appreciation, with Miami; Atlanta; and Tampa, Florida, all reporting the highest year-over-year gains among the cities in the 20-city index in November. Miami led the way with an 18.4% price increase from the year prior, followed by Tampa and Atlanta. All 20 cities reported lower price increases in the year ending November 2022 compared to the year ending October 2022.
Economic weakness, including the possibility of a recession, could continue to hold back potential buyers, said Lazzara.
“Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken,” he said.
The November report provides evidence of the slowing housing market during the fall, said Lisa Sturtevant, Bright MLS chief economist, but it may not show the worst yet of the housing market.
“The home price data released today do not account for the full impact of rising mortgage rates, which were above 7% early in November, and led to a significant pullback in buyer activity,” she said. “In many local markets across the country, home prices have fallen precipitously from their summer peaks as buyers were forced out of the market due to affordability challenges.”
But, she said, talk of a major market correction is just hyperbole.
“We may have already seen the bottom of the housing market,” she said.
Mortgage rates fell throughout January, prompting more buyers to view properties and make offers. Inflation has begun to ease, boosting consumer confidence. Pending home sales improved in December and homebuilder confidence ticked up in January.
“Many agents and brokers are expecting a robust spring housing market, and the overall mood in the market feels much more optimistic than even a month ago,” she said.
Inventory of available homes to buy remains the stubborn sticking point for many buyers. Many current homeowners are hesitant to sell when they have very attractive rates under 4% and buying a new home would mean getting a much higher rate.
“Home shoppers are still going to find limited supply in the market and affordability is still a major challenge, particularly for first-time homebuyers,” Sturtevant said. “The persistent lack of inventory, exacerbated by this ‘rate lock,’ is the main reason why we should expect prices to be stable or even rise in the year ahead.”
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