Home price growth continued to cool in August

Home price growth continued to cool in August, according to the S&P Cotality Case-Shiller Index released Tuesday. Nationwide in August, the home price index came in at a reading of 330.02, representing an annual gain for 1.5%. This is down from the 1.6% yearly increase recorded in July.

“This marks the weakest annual gain in over two years and falls well below the 3% inflation rate. For the fourth straight month, home values have lost ground to inflation, meaning homeowners are seeing their real wealth decline even as nominal prices inch higher,” Nicholas Godec, the head of fixed income tradables & commodities at S&P Dow Jones Indices, said in a statement.

Month-over-month, the national index rose 0.2% after seasonal adjustment.

The 10-city and 20-city composite indexes also reported slower annual growth in August, with the 10-city index (359.59) posting a 2.1% annual increase and the 20-city index (339.99) reporting a 1.6% year-over-year gain. These increases are down from 2.3% and 1.8%, respectively, in July.

On a monthly basis, both composite indexes reported a 0.2% increase in August after seasonal adjustment.

Yet again, New York City posted the highest annual price gain amongst the 20 cities at 6.1% in August. Chicago (5.9%) and Cleveland (4.7%) rounded out the top three. After months at the top of the chart during the height of the pandemic housing market, Tampa again posted the lowest return, with prices falling 3.3% annually in August.

“These Midwest and Northeast markets, which saw modest gains during the pandemic, continue to outperform,” Godec said.

Compared to a month prior, home prices fell in 19 out of the 20 cities, with Portland posting the largest decrease at 1.04% and Chicago recording the lone gain at 0.26%.

Economists believe this cooling home price growth combined with lower mortgage rates could be enough to entice some buyers off the sidelines.

“According to the National Association of Realtors, the median price of an existing home was $432,700 in June when mortgage rates averaged 6.82%. Assuming a 10% downpayment and average property taxes and homeowners’ insurance, the median payment would have been $3,096,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “In September, the median price was down seasonally to $415,200. At a 6.2% interest rate, a buyer now has a median monthly payment of $2,824, a savings of $271 per month. That average $271 per month savings could be enough to bring some buyers into the market.”

However, Sturtevant warns that growing economic uncertainty could still prevent some buyers from jumping into the market. But, she acknowledged that the level of uncertainty differs across the country, noting that it is important for agents to pay attention to local economic trends.

“​​Some of the highest-cost markets, including New York and Boston, are still seeing healthy price gains because these regions have strong local economies and high-wage jobs, along with still-limited inventory,” she said. “It will be important to watch local economic conditions, including unemployment rates, job growth, big employer layoffs or hiring freezes, to help gauge which markets are likely to see cooler prices in the fourth quarter.”