Home price gains slow to a two-year low: CoreLogic

Annual price changes are expected to step into negative territory by the second quarter

Higher mortgage rates are the top reason for the slowdown in home price gains, according to CoreLogic. (iStock)

U.S. home prices hit the lowest rate of gain in two years in November and growth is still on track to move into negative territory by later this year, according to the latest CoreLogic Home Price Index (HPI).

On an annual basis, home prices increased by 8.6% in November compared to 10.1% in October. Price growth is expected to cool to 2.8% year-over-year by November 2023, according to CoreLogic.

On a monthly basis, home prices dropped by 0.2% in November compared to October, according to the report.

Home values are expected to slow further from the spring 2022 peak when home prices increased by 20.1% and annual price gains may enter negative territory by the second quarter.

"While the recent decline in mortgage rates may bode well for the housing market, potential homebuyers are grappling with the idea of buying amid possible further price declines and a continued inventory shortage," Selma Hepp, CoreLogic's deputy chief economist, said in a statement. "Nevertheless, with slowly improving affordability and a more optimistic economic outlook than previously believed, the housing market could show resilience in 2023."

If you are interested in taking advantage of your home value, you could consider applying for a cash-out refinance to access the equity you've built up in your home. You can visit Credible to find your personalized interest rate without affecting your credit score.


High mortgage rates keep buyers sidelined

Higher mortgage rates are the main reason why home prices have cooled, according to CoreLogic. The average rate for 30-year fixed-rate mortgages rose to a yearly high of 7.08% in mid-November from 3.22% in early January. 

Mortgage rates have since dropped below 7%. Still, they remain elevated enough to erode buyer affordability with many homeowners opting to hold onto the lower mortgage rates they already have, according to a separate CoreLogic report.

"Increasing mortgage rates and high home prices have markedly eroded homebuyer affordability in 2022, "Hepp said in a statement. "As a result of weakened buyer purchase power, and in light of rising costs across goods and services, consumer sentiment has fallen to an all-time low, and homebuyers have stepped out of the market." 

"Unfortunately, affordability constraints are weighing more heavily on first-time homebuyers and buyers with limited down payments who were likely priced out of the burgeoning housing market during the last two years," Hepp continued.

If you are interested in taking advantage of lower mortgage rates, you could consider refinancing your loan to lower your monthly payment. You can visit Credible to find your personalized interest rate without affecting your credit score.


As home price growth slows, so have home equity gains  

Substantial home price gains led to record home equity growth across the country for nearly two-thirds of American homeowners with a mortgage, according to CoreLogic.

Some homeowners are turning to home equity loans to release their home equity. Twenty-one percent of homeowners said they planned to take out a home equity loan in 2023 compared to 8% last year, according to a recent MeridianLink survey.

"With so much equity built up from the pandemic, home equity loans are in demand in this market, "Cristy Ward, chief strategy officer of Mortgage Connect, said. "We are seeing a surge in demand for them across our FINTRAC platform, which handles these loans for lenders."

However, homeowners should understand the current value of their home to determine what amount is safe to borrow, cautioned Ward. 

"An important thing to remember is that Home Equity loans are easier and much quicker to obtain than a mortgage, and in many cases, you can get more than you may need, so be sure not to over-borrow," Ward said. "Many lenders are now offering lower introductory rates that can be attractive in the shorter term and that would be an option until 1st mortgage rates go back down, then you could refinance into a lower, long-term rate."

If you are looking to reduce your expenses, you could consider refinancing your home loan to lower your monthly payment. You can visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

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