The housing market is moving deeper into a rut, according to the S&P Cotality Case-Shiller July index.
National home prices grew at one of the slowest rates in a decade, only tallying a 1.7 percent year-over-year growth. The 20-City and 10-City Composites performed marginally better, logging 1.8 percent and 2.3 percent annual growth, respectively.
Nicholas Godec
“July’s results reinforce that the housing market has downshifted to a much slower gear,” said Nicholas Godec, CFA, CAIA, CIPM, Head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices, in the report. “… In fact, this is one of the weakest annual price increases in the past decade — and notably, it’s below the 2.7 percent rise in consumer prices over the same period.”
“In other words, U.S. home values have essentially stagnated after inflation, marking the third straight month of real housing wealth decline for homeowners,” he added. “This reversal is striking: During the pandemic boom, home prices were climbing far faster than inflation, rapidly boosting homeowners’ real equity.”
The City Composites revealed a strengthening sales gap between regions, with the Sun Belt holding markets with the most significant annual price drops (e.g., Tampa’s prices have dropped 2.8 percent), and the Midwest and Northeast seeing the most substantial price gains, with New York (+6.4 percent), Chicago (+6.2 percent) and Cleveland (+4.5 percent) leading the way.
Anthony Smith
Realtor.com Senior Economist Anthony Smith said regional trends reflect the power of local market conditions that either help — or harm — homebuyers as they attempt to navigate broader economic trends.
“While lower rates compared to last fall improved monthly payment scenarios for some, many prospective buyers remained on the sidelines due to high home prices and mortgages,” he said in an email to Inman. “While national prices continued to climb, local market conditions have become increasingly fragmented.”
“Buyers are gaining leverage in some Southern markets, while sellers still hold the upper hand in much of the Northeast and Midwest,” he said. “This regional divide is expected to continue influencing price dynamics and sales activity as the fall season gets underway.”
Smith and Bright MLS Chief Economist Lisa Sturtevant said the immediate future of the housing market will be driven by mortgage rates and inventory trends, both of which impact housing affordability.
Smith said recent dips in mortgage rates have been enough to bring more buyers to the market, but have done little to bring would-be sellers out of the shadows. Declining new listings, paired with a forthcoming slowdown in new-home construction, means homebuyers could have fewer choices in the coming months.
Dr. Lisa Sturtevant
“Regional market activity will likely continue to reflect local supply shifts, with construction and resale inventory moving in opposite directions across much of the country,” he said. “While completed new homes have helped support near-term availability, the pipeline is thinning with housing starts falling in August. Supply will likely tighten further down the road, unless demand conditions improve.”
Although the fall homebuying season is in question, the economists said the current sales struggles reflect a market that is moving back toward a healthier, slower pace.
“The Case-Shiller Index shows that home prices have risen by more than 50 percent over the past five years,” Sturtevant said in an emailed statement. “The pace of home price appreciation over the past few years is unsustainable.”
Godec said “the era of 15 to 20 percent annual home price jumps” is over, which isn’t welcome news for homeowners, who’ve seen their equity grow at a breakneck pace over the past few years. However, slowing home price growth is still a net positive.
“Prices that grow in line with incomes and consumer prices are more sustainable, and they reduce the risk of the kind of affordability crises and speculative bubbles we’ve seen before,” he said. “The ongoing rotation in regional performance is another sign of normalization: Markets with strong local economies and reasonable prices are doing better than those that overshot fundamentals.”
“In short, the housing market’s post-boom era is one of stability over sizzle — a shift that may feel disappointing to sellers used to huge gains, but ultimately creates a more balanced and resilient foundation for the future,” he added.
