- US home prices hit another record in July, according to the S&P CoreLogic Case-Shiller index.
- Prices rose 5% nationwide, a slowdown from prior months.
- However, dropping mortgage rates have helped ease market unaffordability.
The US home-affordability conundrum is not over yet.
New data from Case-Shiller showed home prices rose 5% in July from a year before, marking another record high.
"Accounting for seasonality of home purchases, we have witnessed 14 consecutive record highs in our National Index," wrote Brian D. Luke, S&P Global's head of commodities, real and digital assets.
He added: "Overall, the indices continue to grow at a rate that exceeds long-run averages after accounting for inflation."
Prices jumped by the most in New York, rising 8.8% in July. Las Vegas and Los Angeles followed, with prices increasing 8.2% and 7.2%, respectively. On a seasonally adjusted, month-to-month basis, prices rose in all but San Francisco and Tampa.
If there was one silver lining in the data, it's that the 5% year-over-year marked a deceleration in home-price growth. The same slowdown trend was seen in S&P's 20-City Composite, which also increased, but not as sharply as prior periods.
Slowing home appreciation reflects a pullback in market activity, with existing home sales slumping significantly through summer. In August, these sales dropped 2.5% from July, according to the latest data from the National Association of Reatlors.
Homebuyers have remained cautious in anticipation of lower mortgage rates, a process that has been turbocharged by the Federal Reserve's latest cut to interest rates. As of Tuesday, the weekly 30-year fixed mortgage rate now stands at 6.09% — a 2024 low.
Falling borrowing costs making the market more affordable for buyers. On Tuesday, Redfin reported that shoppers require 1.4% less income to buy the median-priced property.
But some warn that lower mortgage rates will trigger adverse impacts on housing prices. 'Shark Tank' investor Barbara Corcoran has repeatedly warned that falling rates will unleash a wave of demand, causing values to soar. By her estimate, prices could jump as much as 10% once rates hit 6%.
But whether this occurs anytime soon is up for debate. According to Redfin, the market has already priced in future Fed cuts, limiting further mortgage rate downside. Meanwhile, Fitch Ratings also noted that the Fed must keep cutting to extend the decline.
