San Francisco Houses

Two housing reports confirm a softening market 

Economic data from the Federal Housing Finance Agency and the Case-Shiller housing index show a continued slowdown in home value increases.

Updated January 4, 2023
4 minutes

Key points:

  • Home prices across the U.S. increased overall in September but at a slower pace. Two California markets had price drops.
  • The Case-Shiller home price index reported lower year-over-year price gains from January-September 2022.
  • The FHFA house price index in September showed home prices rising more than 12% in the third quarter over 2021.
  • The Fed may slow the pace of interest rate hikes, but additional increases are still likely.

Home prices continued to rise in September but at a slower pace with lower year-over-year price increases reported in key markets, according to a pair of economic reports released Tuesday morning.

The Case-Shiller national home price index and the Federal Housing Finance Agency house price index for September revealed another month of slowdowns in home price gains across the country.

Housing prices increased year-over-year across the country, the FHFA reported. Values rose in the 100 largest U.S. cities, except for in the greater San Francisco and Oakland areas, which had price drops.

Both reports showed a continuing month-over-month slowdown in the pace of home price increases. Economist Criag Lazarra, managing director at S&P Dow Jones Indices, predicted further weakening of home prices amid higher interest rates and mortgage costs.

"Despite considerable regional differences, all 20 cities in our September report reflect these trends of short-term decline and medium-term deceleration," Lazarra said

Price increases declined in every city in September, with a median change of -1.2%. Year-over-year price gains in all 20 cities were lower in September than they had been in August.

The Case-Shiller national home price index showed a 10.6% annual increase in purchase price values in September, down from 12.9% in August.

The Case-Shiller index tracks home prices nationally. Published monthly, the index is a measure of purchase prices for single-family homes. Case-Shiller has a national home price index, a 20-city composite index and a 10-city-composite index. It also looks at 20 individual metro areas.

All 20 cities in the Case Shiller index reported lower year-over-year price increases for January-September 2022 compared to January-August 2022. 

Housing markets in the South showed the highest year-over-year increases for September among the 20 cities Case Shiller measured. Miami was No. 1 with a nearly 25% price gain, followed by Tampa with  23.8%, and Charlotte with a nearly 18% increase. 

FHFA: September house prices 'above a year ago'

The Federal Housing Finance Agency house price index for September showed home prices rising 12.4% between the third quarter of 2021 and third quarter of 2022. But house prices were up just .1% compared to the second quarter of this year. 

"House prices were flat for the third quarter but continued to remain above levels from a year ago," said William Doerner, FHFA economist. "The rate of U.S. house price growth has substantially decelerated."

Doerner noted that the slowdown in housing price increases is "widespread." About a third of all states and large metro areas reported annual growth in home prices below 10%, he said.

The FHFA house price index measures changes in single-family home values from all 50 states and 400 cities.

Though price growth has slowed, Fannie Mae and Freddie Mac announced Tuesday that they will raise the limits on government-backed mortgages to more than $1 million in some areas of the country, the FHFA said — an indication that high home prices are here to stay.

Fed chairman expects rate increases to slow

The Federal Reserve is prepared to slow the pace of interest rate increases. But financial institutions should expect rates to keep rising until inflation is in check.

Fed Chairman Jerome Powell delivered that message in a speech Wednesday before the Brookings Institution in Washington, D.C. Powell offered a preview of actions the Fed will likely take on interest rates when it meets in mid-December.

"Despite the tighter policy and slower growth over the past year, we have not seen clear progress on slowing inflation," Powell said.

The Fed has raised interest rates six times since March 2022 to bring down inflation, which was at 7.75% in October. The Fed's goal is 2% inflation.

The Fed does not directly control mortgage costs. But higher rates for home loans have followed interest rate hikes by the Fed this year.

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