New data from Standard & Poor’s reveal a subtle deceleration of steadily rising home prices, causing some to speculate that a cooling off in the housing market may be on the horizon, even as the market remains far hotter than pre-pandemic levels.
S&P released its monthly Case-Shiller Home Price Index on Aug. 30, which raised eyebrows in the real estate industry because one data point may, some believe, have broad implications for housing markets in the near future.
The analytics firm found that home prices had risen 18 percent between July 2021 and July 2022. While this double-digit increase would have been incredible in a normal housing market, analysts are paying attention for an altogether different reason: This marks the first time in nearly three years that the annual rate of housing price appreciation was lower than the previous month (in May, this figure was a 19.9 percent annual gain).
While subtle, this change in the rate of price appreciation has fueled speculation that the housing market may finally be cooling off after years in which prices have steadily risen so high as to become cost-prohibitive for many prospective homeowners. This prediction is reflective of the experience of Kristina Morales, a veteran realtor who serves as strategic real estate advisor at Real Estate Bees.
“I am definitely seeing the market cool a bit. I expect that home prices are beginning to stabilize and likely returning to normal rates of appreciation,” Morales told The Epoch Times. “Some of my clients are still finding themselves in multiple offer situations, which help drive up prices. However, the competition is not nearly as intense as it was compared to early in the year or over the last two years.”
The unusual dynamics of this housing market and the uncharted waters of the post-pandemic economy have created incentives for construction companies to try new strategies to lure prospective homebuyers to purchase while the market is still strong.
“Another thing I am seeing lately are new construction builders who are releasing a lot of incentives for buyers who purchase inventory homes within a certain time period (that is, before Dec. 31, 2022),” Morales noted. “Most of the builders’ incentives are centered around a lower than market fixed interest rate. All in all, it is still a good time to sell, and buyers are gaining some relief with less competition and more inventory options.”
Overall, while the S&P and Black Knight data may suggest an imminent cooling-off of the housing market, they also remind observers of the outrageous rate of home value appreciation in the past three years. While estimates vary among different firms, it is an indisputable fact that the era following the emergence of COVID-19 has seen one of the swiftest rate of housing price appreciation on record, and the market has far to fall before anything resembling pre-2020 housing prices becomes the norm.
