Home appreciation slows to lowest level in more than 2 years
CoreLogic’s latest home price index shows year-over-year home appreciation of 6.9%, the lowest rate since late summer of 2020.
- Year-over-year appreciation is expected to fall into negative territory this spring before rising again to about 3% at the end of 2023.
- While mortgage interest rates have trended downward since peaking in November, they have risen in recent days after a strong jobs report.
- Eastern states and metros led the way in annual home price growth, while Western regions were more sluggish.
While rising interest rates haven't yet cooled the labor market, they appear to be tempering home prices.
CoreLogic released its December Home Price Index, showing home appreciation rising 6.9% year-over-year. That's the lowest rate of appreciation since late summer of 2020, when some of the more restrictive Covid rules were still in place.
Home price growth fell by 0.4% between November and December, and CoreLogic expects to see another 0.2% decline between December and January when their next report is released.
"The continued slowing of home prices at the end of 2022 reflects weaker housing market demand, primarily caused by higher mortgage rates and a more pessimistic economic outlook in general," said Selma Hepp, chief economist at CoreLogic. "But while prices continued to fall from November, the rate of decline was lower than that seen in the summer and still adds up to only a 3% cumulative drop in prices since last spring's peak."
The steady drop in mortgage interest rates over the past few months was a factor in the slowing rate of decline, but that could be changing. After the latest jobs report was released on Feb. 3 — which found that the U.S. added a higher-than-expected 517,000 jobs in January — mortgage rates rose from 5.99% to 6.45% on Feb. 7 according to the daily mortgage rate survey from Mortgage News Daily.
CoreLogic's Home Price Index is forecasting year-over-year home appreciation to dip into negative territory this spring, but it's worth noting that the market was at its peak in the spring of 2022 before rising interest rates slowed down home sales. Home appreciation at the end of 2023 is projected to increase 3% compared to the end of 2022.
Gains in the East, cooling in the West
States and metros in the eastern U.S. saw the biggest price jumps, with Florida and Vermont recording the highest annual home price gains at 15.2% and 13.5%, respectively. South Carolina posted the third-highest gain, with a 12.2% year-over-year increase.
Among the 20 largest metro areas, Miami posted the highest year-over-year home price increase in December, at 19.5%, while Tampa retained the No. 2 spot at 14.1%.
Idaho was the only state that posted a year-over-year price decline in December 2022, according to the report. The index is expecting year-over-year declines in some major markets by the end of 2023, including Las Vegas (prices projected to drop 3.5%), Phoenix (down 0.9%) and Houston (down 0.7%).
Most of the areas at the greatest risk for declines in 2023 are in the West, with three of the five metros in Washington State. Salem, Oregon, tops the list, followed by Bellingham, Washington; Bremerton Washington; Destin, Florida; and Olympia, Washington.