Mortgage Rates Continue to Sideline Potential Homebuyers
Although interest rate cuts are expected, the usual fall housing market slowdown is likely to contain any significant surge in activity.
Although July marked the 150th straight month of annual growth in home prices, monthly home price growth is starting to slip and annual forecasts are showing smaller anticipated gains, according to CoreLogic’s Home Price Index and forecast for July 2024.
Growth for the category remained below 5% for the third consecutive month in July, coming in at 4.3% for the month compared with a rise of 4.7% in June. Month-over-month, home prices decreased 0.01% in July and the firm said it expects home prices to continue to slide through the remainder of the year as sales slow nationwide. CoreLogic expects home prices to rise only 0.2% for August.
The sluggishness is likely due to high mortgage interest rates, causing buyers to be cautious. The anticipated rate cuts from the Federal Reserve this fall may help improve consumer sentiment around purchasing a home, according to the report.
“Housing demand continued to buckle under the pressure of high mortgage rates and unaffordable home prices, leading to a considerable slowing of home price gains during the summer,” said Dr. Selma Hepp, chief economist for CoreLogic. “The question for home prices going forward is whether the upcoming rate cut from the Fed and expected continuation of falling mortgage rates will be sufficient to motivate potential homebuyers who may start to fear a cooling labor market and continued uncertainty of a soft landing, along with anticipation around the presidential election. And while lower mortgage rates are a boost to affordability and are likely to help buyer demand, the usual fall housing market slowdown is upon us and is likely to contain any significant surge in activity.”
No states posted annual home price declines for the month, Redfin found. The states with the highest increases year-over-year were Rhode Island at 10.6%, New Jersey at 9.7%, Connecticut at 8.3%, South Dakota at 8.1% and Illinois at 7.5%. Miami again posted the highest gains of the metros studied, rising 9.1% year-over-year in July.
CoreLogic’s Market Risk Indicator (MRI) predicts that Gainesville, Florida, on the other hand, is at a very high risk of a decline in home prices over the next 12 months, with a greater than 70% probability of a decline. The Palm Bay-Melbourne-Titusville, Florida; Atlanta-Sandy Springs-Roswell, Georgia; Lakeland-Winter Haven, Florida; and Ogden-Clearfield, Utah, markets are also at very high risk for price declines, said CoreLogic.