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The slowdown in US home prices is showing signs of slowing as mortgage rates fall and buyers return to the market, according to CoreLogic. (one)
According to the latest CoreLogic Home Price Index (HPI), U.S. home price gains slowed further in the final month of 2022, showing the impact of rising mortgage rates on homebuyer demand.
On an annual basis, home prices rose 6.9% in December, compared to 8.6% in November and the historic 20% gain in April 2022.
According to the report, monthly home prices fell 0.4% in December compared to November. Price growth is expected to fall by 0.2% in January.
Higher mortgage rates, which topped 7% in November, held back homebuyers for much of the second half of 2022 and is likely a key reason home prices have lost momentum, according to CoreLogic.
“The continued slowdown in home prices in late 2022 reflects weaker demand in the housing market, driven primarily by higher mortgage rates and a generally more pessimistic economic outlook,” CoreLogic chief economist Selma Hepp said in a statement. “But while prices continued to fall from November, the rate of decline was slower than the summer and still adds up to a cumulative price decline of just 3% since the peak last spring.”
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Housing demand returns when interest rates fall
Housing demand is slowly returning as mortgage rates have fallen to almost 6% in recent weeks. The cut in interest rates has allowed more people to qualify for and afford a $400,000 loan — the average home price — compared to last fall, as interest rates did, according to Freddie Mac were higher, according to Freddie Mac.
Pending home sales have improved, falling 23% annually in the four weeks ended Jan. 29, the smallest drop since September, according to Redfin.
There are signs that sellers are also returning to the market. New listings fell 17% annually — the smallest drop in over four months, Redfin reported.
“We expect more homebuyers and sellers to gradually return to the market through spring, but mixed economic news and mixed market reactions mean the recovery will be uneven,” said Chen Zhao, head of Redfin Economics Research. in a statement. “The Fed hiked rates more slowly than last year, which means mortgage rates are unlikely to rise further. But it also signaled sustained rate hikes to fight inflation, which will likely prevent the sharp drop in mortgage rates that some optimistic buyers have been waiting for.”
If you’re looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are willing to shop for the best rate on a loan, you should visit an online mortgage broker like Credible to compare rates, choose your loan term, and pre-approve yourself to let multiple lenders at once.
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These areas could see the biggest drop in price gains
Florida — where home prices have risen 15.3% annually — has seen the highest price gains of any state, according to CoreLogic. Vermont and South Carolina followed with gains of 13.5% and 12.2%, respectively.
Idaho was the only state to record an annual decline in home prices in December, according to CoreLogic. Home prices in Salem, Oregon are at very high risk of falling over the next 12 months, CoreLogic predicted. Home prices in three Washington state metro areas — including Bellingham, Bremerton-Silverdale and Olympia-Tumwater — are also at very high risk of falling.
“Some peripheral regions that gained popularity during the COVID-19 pandemic saw price jumps and affordability back then, but these areas are now experiencing major corrections,” Hepp said. “And while the price decline is likely to continue into spring 2023, when the market is likely to see some year-on-year declines, the recent fall in mortgage rates has stimulated buyer demand and could lead to a more optimistic home buying season than many expected. “
If you think you are ready to start looking for a mortgage loan or are considering refinancing your loan, You can use the credible marketplace to easily compare interest rates from multiple mortgage lenders and pre-qualify in minutes.
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