A sign is displayed in front of new homes for sale at Hamilton Cottages on September 24, 2020 in Novato, California.
Justin Sullivan | Getty Images
There are signs that price growth could slow in the otherwise hot housing market.
Prices rose 19.8% year-on-year in August, unchanged from the previous month, according to the S&P CoreLogic Case-Shiller indices. This is the first time that the annual gain has not increased since early 2020.
The 10-city composite annual increase was 18.6%, down from 19.2% in July. The 20-city composite rose 19.7% year-on-year, up from 20% the month before. Prices in all cities covered are at an all time high.
âWe have previously suggested that the strength of the US real estate market was due in part to a response to the Covid pandemic, as potential buyers move from urban apartments to suburban homes,â said Craig Lazzara, managing director and global manager index investments. strategy at S&P DJI. “Data for August also suggests that house price growth, while still very strong, may start to slow.”
Phoenix, San Diego and Tampa had the highest year-over-year gains among the 20 cities in August. Phoenix led the way with a 33.3% year-over-year price increase, followed by San Diego with a 26.2% increase and Tampa with a 25.9% increase.
Eight of the 20 cities reported higher price increases in the year ending August 2021 compared to the year ending July 2021.
The price increases were partly fueled by lower mortgage rates in July and August. The average rate on the popular 30-year fixed loan fell below 3% in July and stayed there until mid-September. It then started to rise sharply and is now around 3.25%, according to Mortgage News Daily. Higher interest rates could dampen home prices a bit in the coming months.
Home prices, however, are not expected to drop significantly, as demand from buyers and investors is still high. The supply of homes for sale, especially in the lower end of the market, remains extremely low. A new offer came in over the summer, but it’s still down.
“The continued strong demand from traditional home buyers has been amplified by increased investor demand this summer,” said Selma Hepp, deputy chief economist at CoreLogic. “While the strong rates of home price appreciation shrink the pool of buyers, especially first-time buyers, the depth of the supply and demand imbalance and the high demand among high income earners will continue to drive up prices. “