Home Prices Fall For First Time In A Decade

Home Prices Fall

Home prices fall for the first time since the end of the Great Financial Crisis. Well, can we saw no one saw this coming this year? That is true about a lot of issues, concerns, and more this year. However, one of the most shocking statistics of 2022 is the fact that home prices are actually falling in some areas. While these prices have fallen by less than a percent, remember the immense gains of the past two years offset these small losses. What is in store for the future of the real estate market, now that home prices fall for the first time in a decade?

A Decade Later…

In the beginning of the year, no one saw mortgage rates skyrocketing this high. However, because they have practically doubled this year, home sales and prices have been impacted. For the first time since the end of the financial crisis in the start of the decade, we are seeing home prices falling. This is the first time home prices fall since 2012.

According to a national measure that includes 20 large cities, home prices actually fell, on average, .44% in July. While this might sound alarming, remember, .5% is far less than the 20-30% gains we saw over the last two years. This drop, however, is a troubling sign of times to come in the real estate market. The S&P CoreLogic Case-Shiller index showed the decline for July month-over-month, sparking some fear of what is to come. However, remember the Case-Shiller national index jumped 15.8% year-over-year in July. And, speaking of year-over-year, the slowdown from the 18.1% jump in June was the largest deceleration in the history of the index.

Great Financial Crisis and Now

The last real estate crash ended in 2012. This sparked a longer-term, industry-wide bull-run for real estate. However, this data ends the decade long trend that we had became accustomed to. One thing that is practically guaranteed is the strength of United State real estate. Unfortunately, this looks like this trend could be falling out of favor in the near term. What people need to realize is that home prices are still extremely elevated since the pandemic. A slight down-tick in prices is not a cause of panic just yet.

Home Prices Fall From Federal Reserve

The Federal Reserve started the real estate pandemic frenzy, and is now likely to be the cause of the real estate slowdown. Jerome Powell and friends are 8 months into their unknown journey of slowing inflation. Unfortunately, they have not seen immediate success that economists and ‘professional’ financial managers assumed. It looks like the higher rates for longer narrative is finally setting in with markets, including real estate. Mortgage rates have doubled this year, causing a lot of drama for buyers and sellers a like.

Mortgage rates doubling have slowed sales, and priced out many buyers. Someone who could afford a $2,300 monthly mortgage at 2.5% could afford close to a $600k house. Now, with mortgage rates above 6% across the nation, this same payment can only bring around a $375k home. While existing home sales did improve in the previous month, it is not because of mortgage rates. In fact, home sales likely increased due to seasonality, and a rush to avoid higher mortgage rates.

The biggest month-over-month declines in home prices in July were in San Fran, Seattle, and San Diego. These were 3.6%, 2.5%, and 2% declines, respectively. Now, to be clear, home prices are still up. But a slight downturn could be exactly what buyers need in this market where mortgage rates have pumped the brakes on many buyers dreams. Stay tuned for more updates on the real estate market in the coming months.