A “For Sale” sign outside a home in Atlanta, Georgia, on Friday, February 17, 2023.
Dustin Chambers | bloomberg | Getty Images
Home prices fell in January, just 3.8% more nationally than they were a year ago, according to the US National Security Agency’s Standard & Poor’s CoreLogic Case-Shiller Home Price Index. This is down from 5.6% in December.
Prices have been dropping for seven months in a row, but the decline was a bit smaller in January. This was most likely due to a brief drop in mortgage rates and the resulting jump in sales.
The 10-city complex rose 2.5% year over year, down from 4.4% in December. The 20-city composite also rose 2.5%, down from 4.6% in the previous month.
Home prices have fallen due to higher mortgage rates. The average rate on a 30-year fixed mortgage hit more than a dozen record lows during the first two years of the pandemic, falling briefly to less than 2%, but growing sharply. Since the fall, the price has been hovering in the high 6% range, although it has been volatile in recent weeks due to several bank failures and the resulting stress on the banking industry in general.
“Nevertheless, the Fed remains focused on its inflation-lowering targets, which suggests rates may remain elevated in the near term,” Craig Lazzara, managing director at S&P DJI, said in a statement. So mortgage financing and the possibility of economic weakness is likely to remain a headwind to home prices for at least the next several months.
Prices were down year-over-year in San Francisco (-7.6%), Seattle (-5.1%), Portland, Oregon (-0.5%) and San Diego (-1.4%). It was flat in Phoenix.
Miami, Tampa and Atlanta again had the highest annual price gains among the 20 largest cities. Miami prices increased 13.8%, Tampa prices increased 10.5%, and Atlanta prices increased 8.4%. However, all 20 cities reported lower prices in the year ending January 2023 compared to the year ending December 2022.
Homebuyers may see more flexible sellers this spring, but there are still very few homes available for sale. Mortgage lending may also contract given the stress on the banking system.
“More expensive and less available borrowing, especially with an uncertain economic outlook, is likely to continue to dampen buyer demand. Although home sales are expected to rebound in line with seasonal trends, the spring pace of sales is expected to remain lower. Since last year, Hannah Jones, economic data analyst at Realtor.com said: “Because uncertainty and rising costs limit activity.”
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