An aerial view from a drone shows homes in a neighborhood on January 26, 2021 in Miramar, Florida. According to two separate indices existing home prices rose to the highest level in 6 years.
Joe Raedle | Getty Images
The U.S. housing market cooled off pretty dramatically last year, after mortgage rates more than doubled from historic lows. Home prices, however, have been stickier.
Prices began falling last June, but are still higher than they were a year ago. Now, as demand appears to be coming back into the market, due to a slight drop in mortgage rates, prices are pushing back.
In December, the latest read, U.S. home prices were 6.9% higher year over year, according to CoreLogic. That was the lowest annual appreciation rate since the late summer of 2020. Last April, annual price appreciation hit a high of 20%.
Falling home prices were reflecting weaker housing demand, as inflation, job cuts and uncertainty in the economy piled onto the barrier put up by higher mortgage rates. But mortgage rates began to fall in December, and prices reacted immediately. The cooling continued, but not as much as in the months before.
“While prices continued to fall from November, the rate of decline was lower than that seen in the summer and still adds up to only a 3% cumulative drop in prices since last spring’s peak,” said Selma Hepp, chief economist at CoreLogic.
Hepp notes that some of the exurban areas that became popular during the first years of the pandemic and saw prices rise sharply are now seeing larger corrections. But she doesn’t expect that will last long.
“While price deceleration will likely persist into the spring of 2023, when the market will probably see some year-over-year declines, the recent decrease in mortgage rates has stimulated buyer demand and could result in a more optimistic homebuying season than many expected,” Hepp said.
A monthly survey of homebuying sentiment from Fannie Mae showed an increase in January for the third straight month. Consumers…
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