Home Prices Cooled By More Than Expected in June

Home prices rose by less than expected in June as the housing market has weakened due to rising interest rates.

Before seasonal adjustment, the S&P CoreLogic Case-Shiller U.S. National Index posted a 0.6 percent month-over-month increase in June, while the 10-City and 20-City Composites both posted increases of 0.4 percent.

Economists had expected the 20-City Compoosite to be up 0.9 percent. In May, the index rose 1.22 percent compared with a month earlier.

The national index was up 18 percent compared with June of last year, below the 19.5 percent expected and the 19.9 percent in the previous month. The 10-city composite rose 17.4, down from 19.1 in May.

The 20-city composite was 18.6 higher than a year ago, a big slowdown from 20.5 percent in May and below the 20.6 year-over-year gain expected. Thirteen of the 20 cities reported increases before and after seasonal adjustments.

Although slower than in recent months, the growth rates for all three composites are still high from a historical perspective. Craig J. Lazzara, Managing Director at S&P DJI, said in a statement that all three are at or above the 95th percentile of growth. For the first six months of 2022, the National Composite is up 10.6 percent. In the last 35 years, only four complete years have witnessed increases that large.

“The deceleration in U.S. housing prices that we began to observe several months ago continued in June 2022, as the National Composite Index rose by 18.0% on a year-over-year basis,” says Lazzara said in a statement. “Relative to May’s 19.9% gain (and April’s 20.6%), prices are clearly increasing at a slower rate. This pattern is consistent with our 10-City Composite (up 17.4% in June vs. 19.1% in May) and our 20-City Composite (up 18.6% in June vs. 20.5% in May). It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip.”

The average rate on the 30-year fixed mortgage rose to around six percent in June before falling in July back down to just below five percent. In August, mortgage rates have begun to climb again, with the 30-year fixed rate rising to 5.55 percent.

“We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that continued as our June data were gathered. As the macroeconomic environment continues to be challenging, home prices may well continue to decelerate,” Lazzara said.