Savannah Hulsey Pointer, FISM News
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Housing prices dropping from their recent spike has caused some homeowners to become quickly upside down on their mortgages.
A recent report from S&P Global released Tuesday indicates that prices are still up from what they were a year ago, but they are dropping, month over month.
The greatest decrease in house prices since the metric’s creation in 1987 was recorded in August by the S&P CoreLogic Case-Shiller Index, which analyzes national home prices. Annual growth was reported at 13%, down from 15.6% in the previous month.
“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable,” S&P Managing Director Craig Lazzara said in an analysis. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”
Adding fuel to the fire was the central bank raising their target federal funds rate by 0.75% in both June and July and hiking interest rates by around the same amount in September.
The central bank raised the target federal funds rate by 0.75% in both June and July before hiking rates by the same amount in September. In order to battle inflation, which has risen to its highest level in four decades, policymakers traditionally increase and decrease rate goals by 0.25% increments.
Data from Freddie Mac, a mortgage corporation backed by the government, shows that the 30-year fixed mortgage rate has been below 3% for the majority of the last two years. However, as a result of the Federal Reserve’s efforts, the rate has increased from just over 3% at the start of the year to 6.9%, including a jump of about 1% in less than one month.
A report by MarketWatch indicated that home prices are suffering due to high mortgage rates and recessionary concerns, thus one expert predicts that growth will be flat this year.
“Our forecast is for home-price growth moderation to continue,” Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, said Sunday during the organization’s annual conference in Nashville, Tenn.
The median price of homes has already started moderating and according to Case-Shiller, June to July of 2022 was the first time in 20 years those summer months saw home prices fall month over month.
Facing a likely recession on top of mortgage rates hanging at around 7%, “we’ve already seen a pretty dramatic pullback in housing demand,” Kan said. Last week, the 30-year fixed rate averaged 6.94%, up from 3.85% a year ago. The MBA anticipates that rates will decrease to 5.4% by the end of the next year.
Not all home prices are moving at the same pace, however. A report by Yahoo News showed that prices in some cities are dropping faster than in others.
The city of Boise, Idaho came in at number 10 in the ranking of cities with the fastest dropping home price decreases. Several New York cities were also at the top, including Syracuse, Buffalo, and Albany. New Orleans, Louisiana was number six on the list with Toledo and Cleveland Ohio taking the fifth and fourth spots and Acron was at number two.
Detroit, Michigan was number three, and Pittsburgh, Pennsylvania was number one, as the city whose home prices were dropping the fastest.