Home-Price Growth Slows for Third Straight Month, Report Shows

U.S. home prices gained at an 18.8% annualized rate in November, compared with a 19% pace in the prior month, according to a Tuesday report from S&P CoreLogic Case-Shiller Home Price Indices.

It was the third consecutive month the national index showed a slowdown in the pace of home-price gains. The rate hit an all-time high in August with a 20% annualized advance, a record that exceeded the 14.4% jump seen in September 2005 that was the peak of the last real estate boom, according to S&P Dow Jones Indices data.

“For the past several months, home prices have been rising at a very high, but decelerating, rate,” said Craig Lazzara, managing director at S&P Dow Jones Indices. “That trend continued in November.”

Home prices began surging during the Covid-19 pandemic after the Federal Reserve began an emergency bond-buying program that drove mortgage rates to the lowest levels ever recorded. In the 12 months prior to the March 2020 start of the Fed program, U.S. home prices rose at an average 3.5% annualized pace, according to S&P Dow Jones Indices data.

A separate index that focuses on home prices in the nation’s 20 largest cities showed an annualized gain of 18.3% in November, the fourth consecutive monthly decrease from a record 20% advance in July, according to the S&P Dow Jones Indices data.

Phoenix led the 20-city index, as it has since 2019. The capital of Arizona posted a 32.2% annualized advance in November, followed by Tampa, Florida, with a 29% gain, and Miami, with a 26.6% advance, according to the report.

Las Vegas posted a 25.7% gain from a year earlier, Dallas had a 25% increase, San Diego was 24.4%, Seattle was 23.3%, Atlanta was 21.6%, and Denver was 20.1%, the report said.

Some of the demand is being driven by families who are changing their location to be closer to families during the pandemic, as companies began allowing workers greater freedom to work from anywhere, Lazzara said.

“The strength in the U.S. housing market is being driven in part by a change in locational preferences as households react to the covid pandemic,” he said. “More data will be required to understand whether this demand surge represents an acceleration of purchases that would have occurred over the next several years or reflects a more permanent secular change.”

Home-price gains likely will continue to slow as mortgage rates rise, Lazzaro said. The Fed announced in November it would begin withdrawing its support of the mortgage markets by tapering its monthly purchases. Since then, the average U.S. rate for a 30-year fixed mortgage has risen more than a half a percentage point, as measured by Freddie Mac.

Costlier financing often results in homebuyers qualifying for smaller mortgages because their future mortgage payments are measured against their incomes. Higher interest rates result in bigger monthly bills for new borrowers.

“In the short term, meanwhile, we should soon begin to see the impact of increasing mortgage rates on home prices,” Lazzaro said.