For most people, their house is the biggest asset they own. Homes are still gaining value, but not at a pace fast enough to keep up with inflation. This means homeowners are seeing their housing wealth grow more slowly than inflation, according to CNBC.
Sharper-than-usual price declines in August
Home prices normally fall a bit in late summer due to a drop in demand as the temperatures fall, but the declines in August were sharper than what typically happens at this time of year, CNBC reports. Home prices dropped in most major cities in August more than usual for the season, mainly because mortgage rates stayed high.
Mortgage rates have fallen from just under 7% in June to 6.19% currently, still relatively high compared to historical norms.
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Some cities are still seeing price growth. Over the past year, prices in the New York metro area increased 6.1%; Chicago’s prices are up 5.9%; and Cleveland is up 4.7%.
Other cities, many of which saw sharp increases in demand during the COVID-19 pandemic remote work boom, are seeing price declines, including Tampa, which is down 3.3%; Phoenix is down 1.7%; Miami is down 1.7%; San Francisco is down 1.5%; Denver is down 0.7%; and San Diego is down slightly at 0.7%.
Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a press release that markets that saw the most gains during the pandemic are correcting. “This adjustment may ultimately lead to a more sustainable market, but for now, homeowners are watching their real equity erode while buyers face the dual challenge of elevated prices and high borrowing costs,” Godec said, according to CNBC.
Regional differences in home price trends
The national average doesn’t tell the full story. U.S. home price growth is modest overall, but regionally, home prices in the Northeast and Midwest are rising, while they’re falling in the South and West.
In fact, many cities in the Sun Belt and the West regions are experiencing a weakening housing market. More homes in these regions are becoming available for sale again, inventory is sitting longer on the market as it’s taking more time to find buyers, and sellers are lowering prices or removing their homes from the market because they aren’t selling, Realtor.com reports.
“Regionally, markets in the Northeast and Midwest continue to perform relatively better,” Realtor.com Senior Economist Anthony Smith said. “Supported by tighter resale supply and steadier demand.”
