A “For Sale” sign outside a home in Atlanta, Georgia on Friday, February 17, 2023.
Dustin Chambers | Bloomberg | Getty Images
According to the S&P CoreLogic Case-Shiller US National Home Price NSA Index, home prices slowed in January, rising just 3.8% nationwide from a year earlier. That’s down from 5.6% in December.
Prices have been falling for seven straight months, but the fall was slightly smaller in January. This was likely due to a brief drop in mortgage rates and a resulting jump in sales.
The 10-city association rose 2.5% year-on-year, compared to 4.4% in December. The 20-city cluster also rose 2.5% from 4.6% in the previous month.
Real estate prices have cooled due to higher mortgage rates. The average interest rate on the popular 30-year fixed-rate mortgage hit more than a dozen record lows in the first two years of the pandemic, briefly falling below 2% but rising sharply. Interest rates have been hovering in the high 6% range since the fall, although they have been volatile in recent weeks due to several bank failures and the resulting strain on the entire banking industry.
“Despite this, the Federal Reserve remains focused on its inflation-reducing goals, suggesting rates could remain elevated in the near-term,” Craig Lazzara, managing director at S&P DJI, said in a press release. “Mortgage financing and the prospect of economic weakness are therefore likely to remain headwinds for house prices for at least the next few months.”
Prices were lower year-on-year in San Francisco (-7.6%), Seattle (-5.1%), Portland, Oregon (-0.5%) and San Diego (-1.4%). They were flat in Phoenix.
Miami, Tampa and Atlanta again recorded the hottest annual gains of the top 20 cities. Miami prices rose 13.8%, Tampa prices rose 10.5% and Atlanta prices rose 8.4%. However, all 20 cities reported lower prices in the year ended January 2023 than in the year ended December 2022.
Homebuyers may see more flexible sellers this spring, but there are still too few homes for sale. Mortgage lending could also tighten given the pressure on the banking system.
“More expensive, less available credit, especially with an unclear economic outlook, is likely to continue to limit buyer demand. Although home sales are expected to pick up again in line with seasonal trends, the pace of sales this spring is expected to remain slower than last year. as uncertainty and high costs limit activity,” said Hannah Jones, economic data analyst for Realtor.com.