Two top home price indices reported that home prices dropped significantly again in August, Landlords are being forced to pull back on significant increases due to a sudden drop in tenant demand US Economy Likely To Enter Recession in 2023

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Home Prices Fell Even Faster in August, But Still Up Big Year-Over-Year

The two top home price indices reported that home prices dropped significantly again in August. The Federal Housing Finance Agency (FHFA) reported a fall of 0.7% – a slight increase from the 0.6% decline in July. The S&P Case Shiller 20 city index also reports a decrease of 1.3% from 0.7% in the previous month.

Does this imply that prices are dropping? In theory, absolutely. A home that sold for $397k in June would have sold for about $392k in August, citing FHFA as an example. In addition, the change from gains to losses has been extremely rapid. 

Even while year-over-year growth is less than it was a few months ago, it is still relatively encouraging. Home prices are normally monitored in terms of actual year-over-year changes, despite the rapid shift in the monthly direction. In essence, the house that sold for $392k in August of this year would have sold for about $350k in August of the prior year. This represents a 12% change from year to year. It is likely that the 12% figure will drop further in the upcoming months. What creates part of the challenge of looking at these numbers is that rising prices in the past will be used to compare pricing in the coming months. The market is behaving very differently right now, so it is difficult to compare numbers from year to year.

Mortgage Rates Will Fall To 5.4% As US Economy Likely To Enter Recession in 2023

As stated by the Mortgage Bankers Association, mortgage rates could decrease to 5.4% by the end of next year since the Federal Reserve’s aggressive interest rate increases will cause the US economy to enter a recession. This is an educated guess, and nothing is close to a guarantee. Interest rate predictions from the MBA, Fannie Mae, and even the National Association of Realtors have been – not even close to accurate for over 12 months. With all of the possible events that could impact rates, predicting their future has never been more difficult.

The US housing market is already beginning to feel the effects of the Fed’s aggressive battle against inflation, as mortgage applications reached their lowest level since 1997. Home sales have also been affected, with existing home sales falling 24% in September.

Renters Hit Breaking Point in a Sudden Reversal for Landlords

America’s tenants have had it with record-high housing costs and rising expenditures for everything from food to energy. Due to a sudden drop in tenant demand, landlords are being forced to pull back on significant increases. In many areas of the US, rent increases are slowing, causing an end to a years-long boom that has made housing unaffordable from across the country.

Instead of moving out on their own, young individuals who may do so are staying with their parents or sharing apartments with several other people.

Next week’s potential market-moving reports are:

  • Monday, October 31st – Chicago PMI
  • Tuesday, November 1st – Jobs Openings, Quits, Construction Spending 
  • Wednesday, November 2nd – FOMC Announcement, Fed Chair Jerome Powell Press Conference
  • Thursday, November 3rd – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, November 4th – Unemployment Rate, Average Hourly Earnings

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

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