United States: Home price growth reaches two-year low in October
December 26, 2018
Home price growth continued on its seven-month downward trend in October, as rising mortgage rates reduce affordability. On a month-on-month basis, the S&P/Case-Shiller 20-city composite home price index was flat for the third consecutive time in October. When adjusted for seasonal factors, house prices grew 0.4% from the previous month in October, down from September’s 0.7% and matching market expectations.
In annual terms, home price growth fell to a two-year low of 5.0% in October, down from 5.2% in September. Price gains in West Coast cities remained far stronger than Midwestern and East Coast cities, with Las Vegas, San Francisco and Phoenix registering the largest year-on-year price increases. Overall, 14 out of the 20 cities in the index registered slower annual price growth in October.
Commenting on the outlook, David Blitzer, Managing Director at S&P Dow Jones Indices, noted:
“The combination of higher mortgage rates and higher home prices rising faster than incomes and wages means fewer people can afford to buy a house. Fixed rate 30-year mortgages are currently 4.75%, up from 4% one year earlier. Home prices are up 54%, or 40% excluding inflation, since they bottomed in 2012. Reduced affordability is slowing sales of both new and existing single family homes. Sales peaked in November 2017 and have drifted down since then”.
Author: Joffrey Simonet, Economist