The year 2022 came to a close with a substantial slowdown in the increase in home prices.
At the end of 2022, higher mortgage rates made it harder for home prices to go up. Prices were still higher than they were a year ago, but the rate of increase slowed quickly, according to data released on Tuesday.
The S&P CoreLogic Case-Shiller The U.S. National Home Price NSA Index says that home prices were 5.8% higher in December than they were the year before. That is less than the annual gain of 7.6% in November. Prices are now 4.4% lower than their peak in June.
The 5.8% price gain for all of 2022 was the 15th best in the index’s 35-year history, but it was much lower than 2021’s record-setting 18.9% gain.
The annual increase for a group of 10 cities, which includes the metro areas of New York and Los Angeles, was 4.4% in December, which was less than the 6.3% increase in November. The 20-city average, which includes areas like Seattle and Dallas, had a 4.6% year-over-year increase, which was less than the 6.8% increase from the previous month.
Miami, Tampa, Florida, and Atlanta still had the biggest price increases, at 15.9%, 13.9%, and 10.4%, respectively. All 20 cities had lower prices at the end of the year in December 2022 than they did at the end of the year in November 2022.
“The possibility of stable or higher interest rates means that mortgage financing will continue to be a headwind for home prices,” said Craig J. Lazzara, managing director at S&P DJI. “Economic weakness, such as the possibility of a recession, may also keep people from buying a home.” “Given the chances of a tough macroeconomic environment, it’s likely that home prices will continue to fall.”
Mortgage rates started going up in the spring of last year, and by the end of October, the average rate on a 30-year fixed loan had more than doubled to well over 7%. Then, in December and January, rates went down a little, but they are now getting closer to 7% again.
In January, there was a big jump in the number of homes that went under contract. This probably didn’t keep up in February, when rates went up again and there were still very few homes for sale.
“The market is still full of uncertainty.” Based on weekly data on buyer activity, it seems likely that buyers are keeping a close eye on mortgage rates. Lisa Sturtevant, chief economist at Bright MLS, said, “Sellers will have to price their homes right to attract buyers.” “As a result, home price growth is likely to stay low through the first quarter of the year.”