The second recorded monthly decline in US house price growth comes as mortgage rates increase due to tightening economic policy.
Since the pandemic, house prices have skyrocketed nationally by an average of 40%. Numerous factors including massive monetary stimulus and significant changes in supply and demand have created a perfect storm of ever increasing home values. With millions of Americans experiencing high inflation and supply shortages, the housing market has experienced a spectacular boom over the past 2 years, but it could all be coming to an end.
Following July’s decline, August continued the downward trend in home prices, the largest deceleration seen since early 2012, signaling a further weakening of the overall market. Many factors are contributing to a market slowdown, but primarily we are seeing the Federal Reserve’s interest rates increases leading to higher mortgage costs, which are starting to affect demand for home purchases.
While inflation hovers around 10%, the price of gas and food has gone up even more leading to families having less disposable income. Coupled with rising mortgage costs, the average home mortgage is considerably more expensive than just a year ago, and it’s going to get higher still.
Despite a good economic picture for US jobs and decades low unemployment, some analysts believe home prices could fall by as much as 20% in the near term as the pandemic boom and economic changes cool the housing market down.
Are you seeing home prices fall in your area?
