Home prices declined slightly on a monthly basis in July, while year-over-year growth dropped significantly, according to the latest S&P CoreLogic Case-Shiller Indices report.
Home prices increased by 15.8% annually in July, down significantly from the annual increase of 18.1% in June, Case-Shiller's National Home Price NSA index said. On a monthly basis, home prices fell by 0.3% from June.
"Although U.S. housing prices remain substantially above their year-ago levels, July’s report reflects a forceful deceleration," Craig Lazzara, S&P Dow Jones Indices managing director, said. "For example, while the National Composite Index rose by 15.8% in the 12 months ended July 2022, its year-over-year price rise in June was 18.1%. The -2.3% difference between those two monthly rates of gain is the largest deceleration in the history of the index."
Annual home price gains were the strongest in Tampa, Miami and Dallas, which saw increases of 31.8%, 31.7% and 24.7%, respectively.
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Home prices to decelerate faster than anticipated
In an attempt to control rising inflation, the Federal Reserve has increased the federal funds rate several times this year. And these increases have led to higher interest rates. Recently, mortgage rates even surpassed the 6% mark, according to Freddie Mac data.
And these rising mortgage rates have begun to slow the housing market and home prices.
"As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day," Lazzara said. "Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate."
And home price growth could hit more normal levels sooner than previously expected.
"Rapid home price deceleration, which is spreading beyond the West Coast markets, was anticipated given the Fed’s actions and will bring home price growth closer in line with income growth," CoreLogic Deputy Chief Economist Selma Hepp said in a statement. "Returning to long-term average of 4% to 5% annual price growth is closer than initially anticipated – potentially by early 2023."
If you want to take advantage of your home’s equity before mortgage rates rise higher, you could consider using a cash-out refinance. Visit Credible to compare multiple mortgage lenders at once and choose the one that has the best interest rate for you.
Home equity rises to record high
Home equity gained a collective $3.6 trillion annually in the second quarter of 2022, hitting yet another new record high, according to CoreLogic’s latest Homeowner Equity Report. This means the average homeowner now holds $300,000 in home equity.
U.S. homeowners with a mortgage saw their equity increase by 27.8% annually, or about $60,200 per borrower, since the second quarter of 2021. Borrowers in Hawaii, California and Florida gained an average of $100,000 in equity.
"For many households, home equity is the only source of wealth creation," Hepp said. "As a result, recent record gains in equity and record declines in loan-to-value ratios will provide many owners with a financial buffer in case economic conditions worsen. In addition, record equity continues to provide fuel for housing demand, particularly if households are relocating to more affordable areas."
If you are struggling in today’s economy, you could consider taking cash out of your home to help pay down debt. Although mortgage interest rates are rising, they remain much more affordable than other options such as personal loans or credit cards. You can contact Credible to speak to a home loan expert and see if this is the right option for you.
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