Yearly home price growth continued to cool in November as mortgage rates reached some of their highest levels in decades, which resulted in annual home price gains shrinking for the eight consecutive month, according to the S&P CoreLogic Case-Shiller National Home Price Index, released Tuesday.
Nationwide, home prices posted an annual gain of 7.7% in November, bringing the index to a reading of 297.29. In October, the index recorded a year-over-year increase of 9.2%.
On a month-over-month basis, the U.S. National Index was down 0.6% in November.
“The National Composite Index fell -0.6% for the month, reflecting a -3.6% decline since the market peaked in June 2022,” Craig J. Lazzara, the managing director at S&P DJI, said in a statement. “These declines, of course, came after very strong price increases in late 2021 and the first half of 2022. Despite its recent weakness, on a year-over-year basis the National Composite gained 7.7%, which is in the 74th percentile of historical performance levels.”
The Case-Shiller 20-city home price index posted a 6.8% annual increase, down from 8.6% in October. The annual jump brought the 20-city index to a reading of 301.51.
Month over month, the 20-city index dropped 0.8% before seasonal adjustment, with all 20 cities analyzed posting monthly price declines. (The Case-Shiller home price indices for November is a three-month average of closing prices in September, October and November. Because most home sales take several months from contract to closing, the data likely includes some deals struck in July and August.)
Home price growth in the 10-city composite index also slowed in November, recording an annual gain of 6.3% to a reading of 313.07. In October, the 10-city index posted a yearly increase of 8.0%. Compared to a month prior, the 10-city index was down 0.7% before seasonal adjustment in November.
Miami and Tampa once again had the highest annual price gains among the 20 cities in November, with yearly increases of 18.4% and 16.9%, respectively. Unlike previous months, however, Atlanta narrowly surpassed Charlotte to land the No. 3 spot with an annual price gain of 12.7%.
“All 20 cities in our November report showed price declines on a month-over-month basis, with a median decline of -0.8%. Interestingly, home prices in San Francisco were down by -1.6% year-over-year, the first negative result for any city since San Francisco’s -0.4% decline in October 2019,” Lazzara said. “This is the worst year-over-year result for San Francisco in more than 10 years (since a -3.0% result in March 2012). West coast weakness was not limited to California, as San Francisco was followed by Seattle (+1.5%) and Portland (+3.9%) at the bottom of the league table. In contrast, November’s best-performing cities were clustered in the Southeast.”
Looking ahead, Lazzara expects prices to continue to soften given the uncertainties faced by the housing market and the economy as a whole.
“As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices,” Lazzara said. “Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”
Lisa Sturtevant, the chief economist at Bright MLS, added: “But despite the slowdown in price appreciation, talk about a major market correction is just hyperbole. In fact, we may have already seen the bottom of the housing market. Mortgage rates fell throughout January, prompting more buyers to view properties and make offers. Inflation has begun to ease, boosting consumer confidence. 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.”