US single-family home prices moderated further on an annual basis in January, which together with declining mortgage rates could pull buyers back into the housing market.
The S&P CoreLogic Case-Shiller national home price index, covering all nine census divisions, increased 3.8% year-on-year in January, data showed on Tuesday, marking the ninth straight month of decelerating annual home price gains. That followed a 5.6% advance in December.
The moderate rise also reflected last year’s large increase dropping out of the calculation. Monthly prices fell 0.2% in January after adjusting for seasonal fluctuations — the seventh straight month of declines.
The housing market has been squeezed by the Federal Reserve’s aggressive interest rate hikes to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
But mortgage rates have resumed their downward trend, with the Fed last week indicating it was on the verge of pausing further increases in borrowing costs after the collapse of two regional banks caused financial market stress.
“Given the mortgage investor market response since Fed’s March meeting, home price growth may surprise to the upside if mortgage rates remain favorable, especially in light of continued supply constraints,” said Selma Hepp, chief economist at CoreLogic.
“But, ongoing volatility in mortgage rates and fallout from the banking crisis could put a damper on spring home-buying season, particularly if credit tightening impacts mortgage availability and consumer confidence takes another hit.”
Annual house price growth remained strong in the Southeast, with double-digit gains in Miami and Tampa.
Solid price increases were also recorded in Atlanta and Charlotte.
The South experienced an influx of population as companies offered workers the flexibility to work anywhere during the COVID-19 pandemic.
House prices continued to decline in the West.
Annual house prices fell in San Diego, Portland, San Francisco and Seattle.
The region experienced rapid house price increases in prior years.
The cooling in overall house price inflation was reinforced by a separate report from the Federal Housing Finance Agency on Tuesday showing home prices climbed 5.3% in the 12 months through January after rising 6.7% in December.
House prices rose 0.2% month-on-month after dipping 0.1% in December.