The growth in home prices — locally and nationally — cooled in September, according to one-widely watched real estate yardstick.
A measure of home prices in 20 U.S. cities jumped at a 19.1% annual rate, down from 19.6% in August and the second straight slowdown, the S&P CoreLogic Case-Shiller index showed Tuesday. In Los and Angeles and Orange counties, one of the 20 cities, prices were rising at a 18.3% pace in September vs. 18.5% in August — also the second-straight drop.
The mild cooling comes more than a year after the pandemic sparked fierce competition for a tight supply of listings across the country. Fewer families generally shop for homes after the start of the school year, and September’s jump in mortgage rates curbed buyers’ ability to bid up prices.
More owners are expected to list their properties for sale in the coming months, which would help ease the inventory shortage. But demand remains intense, signaling that meaningful relief from price gains may be a ways off.
For example, a measure of contracts to buy previously owned U.S. homes jumped to a 10-month high in October, the National Association of Realtors reported Monday. Completed purchases are on track to exceed 6 million in 2021, the most in 15 years, the group said.
“Housing prices continued to show remarkable strength in September, though the pace of price increases declined slightly,” said Craig J. Lazzara, managing director at S&P Dow Jones Indices.
Cities with the biggest price increases were Phoenix, which was up 33.1% from a year ago, followed by Tampa, with a 27.7% gain, and Miami with a 25.2% increase.
Even the cities with the smallest annual price gains — Chicago, Minneapolis and Washington DC — all saw prices rise by more than 10% from a year ago.
The strength in the US housing market has been driven by the pandemic, Lazzara said, including potential buyers moving from urban apartments to suburban homes.
“More data will be required to understand whether this demand surge represents simply an acceleration of purchases that would have occurred over the next several years, or reflects a secular change in locational preferences,” he said.
A huge number of buyers fighting over a historically low number of homes for sale has pushed prices higher for months, all while mortgage interest rates have remained low. Beaten down during the most competitive months early in the summer, some homebuyers may have bowed out by September.
“Today’s S&P Case-Shiller Index spotlights an early fall housing market with fewer families actively looking for homes after the start of a new, and mostly in-person, school year,” said George Ratiu, Realtor.com’s manager of economic research.
Another factor contributing to easing of home price growth was an increase in mortgage rates during September, he said. Freddie Mac’s 30-year fixed loan moved from 2.87% at the start of September to 3.01% by the end of the month, which likely curbed buyers’ ability to bid up prices.
While the index shows prices easing up in September, the strong demand for homes continues.
“As we approach the end of a tumultuous 2021, real estate markets continue to struggle with inventory, homes are selling quickly and prices continue to rise,” Ratiu said.
But, he said, he expects a slightly more buyer-friendly market in 2022.
“The market has cooled since the beginning of the year, when dozens of competing bids, contingency waivers and price escalation clauses made home shopping a struggle, especially for first-time buyers,” said Raitu.
“A growing number of homeowners are preparing to list in the next six months, hinting at an uncharacteristically active winter season. In addition, inflation and rising mortgage rates are squeezing many household budgets,” he said. “For buyers, the landscape looks more promising as we head into 2022.”
Bloomberg, CNN and the Southern California News Group’s Jonathan Lansner contributed to this report.