The U.S. housing market and home prices are rapidly decreasing

Learn what it means when the housing market begins to cool off, but the Federal Reserve is still intent on raising interest rates in order to fight inflation.


With the pandemic boom coming to an end, home prices are cooling down at a record rate.

housing market
Home prices are decreasing significantly fast. Source: Adobe Stock.

According to the latest S&P CoreLogic Case-Shiller Index data released just last Tuesday, the pandemic-era boom that took over the U.S. housing market might be coming to an end. The document says that prices are rapidly decelerating – their fastest annual pace on record in July. 

Home prices were still on a steady high YoY back in July, however the rate of growth is on a quick decline. For the 12 months ending in July, the prices at the national level increased by 15.8%. But that growth rate was still below the increase in June, which was 18.1%.

The S&P CoreLogic Case-Shiller Index says that this decline of 2.3% was the biggest deceleration they have on record to this day. According to Craig J. Lazzara, the managing director at S&P, the housing market remains above their levels from a year ago. But the report from July reflects a significant deceleration. 

The housing market has quickly cooled recently largely due to mortgage rates surging in response to the constant interest rate hike by the Federal Reserve. Last week, the average 30-year fixed rate mortgage was approximately 6.30%. That’s a staggering 3.41% increase since the same period last year. 

These rising mortgage rates have been hampering affordability for possible buyers who are already facing the reality of expensive home prices due to the pandemic. Not to mention the results of decades-high inflation. 

The housing market is declining at major areas as well

housing market
Major areas are also suffering from rapid decrease in housing prices. Source: Adobe Stock.

The CS 10-City Composite index is responsible for including housing prices in major metropolitan areas such as New York, Boston and Miami. It reported an annual growth of almost 15% in July, a decrease from the 17.4% reported in the previous month. The 20-year index grew 16%, down from 18.7%. 

When compared to a monthly basis, the housing market prices actually decreased from June to July. The seasonally adjusted index was 0.2% lower. It marks the first real decline by that measure in over 10 years. 

As for the 10-City index, it dropped by 0.5% on a month-over-month scale. The biggest 20-City index presented a 0.4% decline. Which is the first monthly drop in over 10 years as well. There were only seven cities that are part of the S&P with an increase in home prices in July. 

Lazzara says that mortgage financing has become increasingly more expensive as the Federal Reserve continues to hike interest rates. Since the current prospects are for an even more challenging macroeconomic situation, the housing market is likely to decelerate. 

Specialists have noticed that this housing market decrease has become worse since mid-2022. Experts now believe that there will be significant price decreases by 2023 as well. The cities who had a boom in prices due to the pandemic and saw interest rising in the last couple of years will most likely suffer the largest blow. 

What is an LCOL area?

Do you know what LCOL means? If you’re looking to buy your first, or next, house, you should become familiar with this term. Follow the link below to understand it better and how it can be helpful when you’re researching where to live.

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What is an LCOL area, and what does it mean?

Even if you wish to live in a mansion in LA, it is not always possible. Maybe you'll have to choose an LCOL area. Read this content to learn what it means.

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