Home price appreciation slowed again in December, but 2022 was still a big year for growth: Case-Shiller
Home prices have room to drop further – here's why
Fewer buyers in the market pushed annual home price gains lower in December for the sixth consecutive month. Despite the continued cooling in prices, 2022 posted the 15th-highest annual growth rate in the S&P CoreLogic Case-Shiller Indices report's 35-year history.
Home prices across the U.S. increased by 5.8% annually in December, down from the 7.7% annual increase in November, Case-Shiller's National Home Price NSA index showed. Home prices have fallen by 4.4% since the market peaked in June 2022.
"The cooling in home prices that began in June 2022 continued through year-end, as December marked the sixth consecutive month of declines for our National Composite Index," Craig Lazzara, S&P Dow Jones Indices managing director, said. "For 2022 as a whole, the National Composite rose by 5.8%, the 15th best performance in our 35-year history, although obviously well below 2021's record-setting 18.9% gain."
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INFLATION IS WHY SOME HOMEOWNERS DON'T HAVE ENOUGH INSURANCE TO COVER A DISASTER: SURVEY
Home prices are likely to keep slowing
Home prices are largely anticipated to keep slowing, according to the report.
Inflation, which has shown signs of cooling, will likely take some time before it reaches the 2% target rate the Federal Reserve has set. This means that the Fed may continue raising interest rates over the next year, which could impact mortgage rates.
Mortgage rates have fluctuated between 6% and 7% recently, creating affordability challenges for many buyers. A continued pullback from buyers is likely to keep pressuring the direction of home prices down, according to Lazzara.
"The prospect of stable, or higher, interest rates means that mortgage financing remains a headwind for home prices, while economic weakness, including the possibility of a recession, may also constrain potential buyers," Lazzara said. "Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken."
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U.S. FOURTH QUARTER GDP ESTIMATE LOWERED AS CONSUMER SPENDING SLOWS
This city saw the biggest drop in price appreciation
On a monthly basis, home prices fell across the nation in December, according to the report. The national home price index dropped 0.8% month-over-month and the 10-city and 20-city composites fell by 0.4% and 0.5%, respectively.
"Prices fell in all 20 cities in December, with a median decline of -1.1%, Lazzara said. "Moreover, for all 20 cities, year-over-year gains in December (median 4.4%) were lower than those of November (median 6.4%)."
The city with the biggest decline in price appreciation was San Francisco, California, where prices dropped 4.2% year-over-year in December. Two other west coast cities – Seattle, Washington and Portland, Oregon – are in the bottom three of the fastest cooling home prices.
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